When the Auditor Identifies an Area of the Accounting System

question 8

Multiple Choice

When the auditor identifies an area of the accounting system with missing controls (i.e. ,a weakness or deviation) ,this would lead to a modification of the audit program in that area that would

• A)increase the amount of tests of controls.
• B)increase the reliance on tests of controls.
• C)cause the issuance of a qualified or adverse opinion.
• D)eliminate the need for a test of controls.

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Definitions:

Net Operating Income

A financial metric that calculates a company's profitability by subtracting operating expenses from gross profit.

Direct Labor Cost

The total cost of labor directly involved in the production of goods, including wages and benefits for the workers on the production line.

Variable Costing

An accounting technique that considers only variable costs - those that vary with production levels - when calculating the cost of producing goods.

Net Operating Income

The earnings a business retains following the subtraction of operational costs, not including interest and taxes.