After Obtaining an Understanding of Internal Controls and Assessing Control

question 7

Multiple Choice

After obtaining an understanding of internal controls and assessing control risk of an entity, an auditor decided not to perform tests of controls for purposes of the audit. The auditor most likely decided that:

• A)the available evidential matter obtained through tests of controls would not support an increased level of control risk.
• B)a reduction in the assessed level of control risk is justified for certain financial statement assertions.
• C)it would be inefficient to perform tests of controls that would result in a reduction in planned substantive procedures.
• D)the assessed level of inherent risk exceeded the assessed level of control risk.

Understand the concept testing phase and its role in evaluating new-product ideas before moving to the actual production phase.

Comprehend various strategies firms adopt to generate new-product ideas including crowdsourcing and its impact on innovation.

Recognize the importance of customer experience management (CEM) in designing and delivering products that meet consumer expectations.

Identify the different financing methods including crowdfunding for securing early-stage funding for new-product development.

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Definitions:

Standard

A benchmark or a set level of performance or achievement that is established for a process or product.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost of variable overhead allocated, based on the efficiency of operations.

Supplies Cost

Supplies cost refers to the expense incurred in purchasing office or production supplies that are necessary for day-to-day operations.

Variable Manufacturing Overhead

Costs in the manufacturing process that fluctuate with production volume, such as utilities and raw materials, which do not remain constant as production levels change.