On a High Level, the Accounting Processes of a Business

question 30

Essay

On a high level, the accounting processes of a business consist of internal controls, individual transactions, and account balances.
Required:
A. Describe the relationship between internal controls, individual transactions, and account balances.
B. Discuss how evidence regarding each of these three areas can help an auditor determine if the financial statements are fairly stated.

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Definitions:

Labor Rate

The amount paid to an employee per unit of time, usually per hour or year.

Direct Materials Purchase Budget

A financial plan that estimates the quantities and costs of direct materials to be purchased to meet production requirements.

Ending Inventories

Ending inventories refer to the final amount of goods available for sale or use at the end of an accounting period.

Direct Labor Budget

A financial plan that estimates the cost of direct labor needed to meet production needs within a specific timeframe.