When an Auditor Is Approached to Perform an Audit for the First

question 9

Multiple Choice

When an auditor is approached to perform an audit for the first time, the auditor should make inquiries of the previous auditor. This is a necessary procedure because the predecessor may be able to provide the successor with information that will assist the successor in determining:

• A) whether the predecessor's work should be utilised.
• B) whether the company follows the policy of rotating its auditors.
• C) whether the predecessor's assessment of control risk has been high.
• D) whether the engagement should be accepted.

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Definitions:

Actual Overhead

The actual amount of overhead costs incurred by a company during a specific period.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products by estimating overhead costs in advance.

Automated Manufacturing

The use of computer-controlled machinery and robotics in the production process to increase efficiency and reduce human error.

Activity Base

A measure used to assign costs to cost objects based on their use of activities, often used in activity-based costing.