Under Which Circumstance Is It Likely That the Extent of Substantive

question 22

Multiple Choice

Under which circumstance is it likely that the extent of substantive procedures will be expanded beyond that anticipated in the audit plan?

• A)The auditors have determined that controls have been implemented (placed in operation)but,in accordance with the audit plan,have performed no tests of controls.
• B)Certain controls do not leave a trail of documentary evidence.
• C)Deviation rates were greater than zero and approached anticipated levels.
• D)The operating effectiveness of certain controls was found to be less than expected,although no material misstatements were identified.

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Definitions:

Conversion Costs

The combination of direct labor costs and manufacturing overhead costs that are incurred to convert raw materials into finished goods.

Weighted Average Method

A cost accounting method that calculates the cost of goods sold and ending inventory based on the average cost of all goods available for sale.

Direct Labor

Direct labor refers to the work of employees directly involved in the production of goods or services, often considered variable costs.

Equivalent Units

A method used in managerial accounting to calculate the number of complete units that could have been produced given the total amount of materials and effort expended.