When Selecting Items for Testing, the Auditor Concentrates Their Selection

question 26

Multiple Choice

When selecting items for testing, the auditor concentrates their selection on high dollar value items. This approach is:

• A) never appropriate in performing audit procedures under Australian auditing standards.
• B) not an audit sampling technique but is often an appropriate evidence collection technique.
• C) appropriate only if the auditor is undertaking statistical sampling.
• D) generally a useful and efficient method for all audit tests.

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Definitions:

Total Costs

The sum of all expenses incurred in the production of goods or services, including both fixed and variable costs.

Break-even Point

The level of sales at which total revenues equal total expenses, resulting in no net profit or loss.

Variable Cost

Expenses that change in proportion with the level of activity or production volume, such as materials costs or sales commissions.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business over a certain period, such as rent, salaries, and loan payments.