A Five-Step Approach Can Be Used to Identify Deficiencies, Significant

question 98

Multiple Choice

A five-step approach can be used to identify deficiencies, significant deficiencies, and material weaknesses. The first step in this approach is

• A) identify the absence of key controls.
• B) consider the possibility of compensating controls.
• C) determine potential misstatements that could result.
• D) identify existing controls.

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Definitions:

Relevant Range

The range of activity within which the assumptions about variable and fixed cost behaviors hold true.

Variable Cost

Costs that change in proportion to the level of output or activity in a business operation.

Total Variable Cost

The total of all costs that vary with changes in the production level or sales volume, such as raw materials, direct labor, and variable overhead.

Relevant Range

The range of activity or volume over which the assumed cost behavior is valid, within which fixed and variable costs do not change.