Which of the Following Best Describes the Reason Why Independent

question 35

Multiple Choice

Which of the following best describes the reason why independent auditors report on financial statements?

• A)A management fraud may exist and it is more likely to be detected by independent auditors.
• B)An audit provides credibility to the financial statements.
• C)A misstatement of account balances may exist and is generally corrected as the result of the independent auditors' work.
• D)Poorly designed internal control may be in existence.

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Definitions:

Fixed Manufacturing Overhead

Costs associated with production that do not vary with the level of output, including rent, salaries, and equipment depreciation.

Deferred

A term referring to expenses or incomes that have been recorded but not yet incurred or realized, impacting future periods.

Inventories

The complete list of items such as merchandise, raw materials, and finished goods that a company holds for sale or production.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and treats fixed manufacturing overhead as a period cost.