The Auditor Is Testing for the Balance-Related Audit Objective of Detail

question 18

Multiple Choice

The auditor is testing for the balance-related audit objective of detail tie-in when they

• A) prove the schedule of investment activity as to additions and subtractions.
• B) perform a physical inspection of the security.
• C) verify the quoted market prices.
• D) test management's assumptions related to valuation.

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Definitions:

Absorption Costing

An approach for assigning costs to a product that integrates all aspects of manufacturing expenses, from direct materials and labor to both types of overheads - fixed and variable.

Direct Materials

Direct materials are raw materials that can be directly attributed to the production of specific goods or services.

Variable Overhead

Costs that change in proportion to the level of production or business activity, such as utilities or raw materials.

Variable Cost

Expenses that vary in direct proportion to changes in the level of production or sales volume.