An Auditor's Determination of a Lower Level of Control Risk

question 89

Multiple Choice

An auditor's determination of a lower level of control risk would most likely be associated with

• A) larger population sizes for tests of controls.
• B) larger samples for substantive procedures.
• C) smaller samples for substantive procedures.
• D) lower levels of detection risk.

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Definitions:

Fixed Costs

Business expenses that remain constant regardless of production volume, such as rent or salaries.

Total Overhead Variance

The difference between the actual overhead costs incurred and the standard or budgeted overhead costs anticipated for a particular period.

Direct Labor Hours

The total hours worked by employees directly involved in the manufacturing process or providing a service.

Manufacturing Overhead

Costs incurred in the manufacture of a product which are not directly traceable to specific units produced, such as utility costs and maintenance expenses.