Which of the Following Audit Procedures Most Likely Would Provide

question 40

Multiple Choice

Which of the following audit procedures most likely would provide assurance that a manufacturing entity's inventory valuation is proper?

• A)Testing the entity's computation of standard overhead rates.
• B)Obtaining confirmation of inventories pledged under loan agreements.
• C)Reviewing a cutoff procedure for inventories.
• D)Tracing test counts to the entity's inventory listing.

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Definitions:

Operating Leverage

A measure of how sensitive net operating income is to a given percentage change in unit sales.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed costs in a company's cost structure.

Break-Even Point

The level of production or sales at which total revenues equal total costs, resulting in no profit or loss.

R-Squared

A statistical measure representing the proportion of the variance for a dependent variable that's explained by an independent variable or variables in a regression model.