An Auditor Would Most Likely Be Concerned with Internal Control

question 17

Multiple Choice

An auditor would most likely be concerned with internal control policies and procedures that provide reasonable assurance about the:

• A)efficiency of management's decision-making process.
• B)appropriate prices that the entity should charge for its products.
• C)methods of assigning production tasks to employees.
• D)entity's ability to accurately process and summarize financial data.

Comprehend the structure and purpose of responsibility accounting performance reports.

Calculate the allocation of joint costs using the value basis method.

Recognize the distinction between controllable and uncontrollable costs in management reporting.

Identify the types of costs associated with joint production processes.

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Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.

Net Profit

The amount of money a company earns after deducting all its expenses, taxes, and costs from its total revenue.

Variable Manufacturing Costs

Costs that fluctuate with the level of production, including direct materials, direct labor, and variable manufacturing overhead.

Direct Method

An accounting approach used to allocate service department costs directly to producing departments without considering other service departments.