When Evaluating the Effectiveness of a Client's Internal Controls with a Tolerable

question 49

Multiple Choice

When evaluating the effectiveness of a client's internal controls with a tolerable rate of deviation of 5%,the audit team determined the upper limit rate of deviation to be 4%.Based on this information,which of the following decisions would the audit team most likely make?

• A) Reduce the planned degree of reliance on internal controls.
• B) Increase the extent of further audit procedures.
• C) Rely on internal controls as planned.
• D) Expand the sample to examine additional applications of the control.

Understand the implications of favorable and unfavorable variances on cost control and performance evaluation.

Apply standard costing in the calculation of work in process and finished goods inventory.

Analyze the impact of poor quality materials on production efficiency and cost.

Recognize the significance of investigating both favorable and unfavorable variances.

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Definitions:

Conjunction

In grammar, a word used to connect clauses or sentences or to coordinate words in the same clause. In logic, a compound statement formed with the word "and" to connect two statements, both of which must be true for the whole conjunction to be true.

Contingency

A future event or circumstance that is possible but cannot be predicted with certainty.

Conjuncts

Components within a conjunction, which is a compound statement formed by combining two or more statements with the connector "and".

Contingencies

Possible, future events or conditions that might affect the outcome of a plan or project, often requiring planning for different scenarios.