The Work of Internal Auditors May Affect the Independent Auditor's

question 21

Multiple Choice

The work of internal auditors may affect the independent auditor's

• A)procedures performed in obtaining an understanding of the internal control structure and in assessing the risk of material misstatement only.
• B)procedures performed in obtaining an understanding of the internal control structure and substantive tests performed in gathering direct evidence only.
• C)procedures performed in assessing the risk of material misstatement and substantive tests performed in gathering direct evidence only.
• D)procedures performed in obtaining an understanding of the internal control structure and in assessing the risk of material misstatement and substantive tests performed in gathering direct evidence.

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Definitions:

Manufacturing Overhead Costs Applied

The estimated indirect costs associated with production, such as utilities, rent, and maintenance, allocated to products.

Overapplied Overhead

Occurs when the allocated manufacturing overhead cost is greater than the actual overhead cost incurred.

Underapplied Overhead

Occurs when the allocated manufacturing overhead cost is less than the actual overhead costs incurred.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company. This includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good.