Which of the Following Is True Regarding the Relationship Between

question 31

Multiple Choice

Which of the following is True regarding the relationship between tests of controls and procedures to obtain an understanding?

• A)In obtaining an understanding of internal control,the procedures to obtain an understanding are applied to all controls identified during that phase.
• B)Tests of controls are applied only when the assessed control risk has not been satisfied by the procedures to obtain an understanding.
• C)Procedures to obtain an understanding are performed only on one or a few transactions.
• D)All of the above are correct.

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Definitions:

Total Cost Method

An accounting method that involves recording all production costs to inventory until the goods are sold, at which point they are expensed.

Markup

The amount added to the cost of a product to determine its selling price, usually expressed as a percentage of the cost.

Differential Analysis

The process of comparing the costs and benefits of alternative business decisions.

Processing Cost

The expenses incurred in the course of transforming raw materials into finished products.