Which of the Following Procedures Would an Auditor Most Likely

question 46

Multiple Choice

Which of the following procedures would an auditor most likely perform in planning a financial statement audit?

• A)Inquiring of the client's legal counsel concerning pending litigation.
• B)Comparing the financial statements to anticipated results.
• C)Examining computer-generated exception reports to verify the effectiveness of internal controls.
• D)Searching for unauthorized transactions that may aid in detecting unrecorded liabilities.

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Definitions:

Cost Center

A function or department within an organization that does not directly add to profit but still incurs costs, such as HR or customer service departments.

Controllable Margin

A measure of profitability that focuses on the income and expenses directly controlled by a manager or business unit, excluding fixed costs.

Fixed Costs

Expenses that do not change with the level of production or sales activities over a relevant period.

Contribution Margin

The difference between sales revenue and variable costs, indicating the amount contributed towards covering fixed costs and generating profit.