In an Audit Test of Recorded Interest Expense and Accrued

question 12

Multiple Choice

In an audit test of recorded interest expense and accrued interest,the auditor was able to detect that the recorded interest expense was higher than the calculations showed.This may indicate

• A) A failure to accrue interest occurred.
• B) Interest payments are in default.
• C) Interest payments were charged to another account.
• D) Interest was paid on an unknown debt or unrecorded liability.

---

Definitions:

Direct Materials

Raw materials that can be directly attributed to the production of finished goods.

Direct Labor-Hours

Total working hours accrued by employees integral to the manufacturing sequence.

Variable Overhead

Costs of production that vary directly with the volume of output, such as utilities and labor efficiency.

Direct Labor-Hours

The total hours worked by employees directly involved in manufacturing products, used as a basis for assigning labor costs to those products.