While Performing an Audit of Accounts Payable,Clayton,CPA,is Using Variables Sampling

question 28

Multiple Choice

While performing an audit of accounts payable,Clayton,CPA,is using variables sampling to determine the audited value of the account based on selected purchase orders.Which of the following options is most likely to reduce the necessary sample size?

• A)A decrease in the level of tolerable misstatement.
• B)An increase in the expected level of misstatement.
• C)An increase in the variability of the size of accounts payable transactions.
• D)An increase in the necessary risk of incorrect acceptance.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, based on a set formula prior to the start of a period.

Manufacturing Overhead

Indirect costs related to the production process, such as equipment maintenance and factory rent.

Labor-Hours

A measure of the work effort in hours contributed by labor to produce a unit or complete a process.

Variable Manufacturing Overhead

Costs in the manufacturing process that vary with production volume, including costs related to supplies and utilities directly involved in production.