If the Objective of a Test of Details Is to Detect

question 42

Multiple Choice

If the objective of a test of details is to detect the overstatement of sales, the auditor should trace transactions from the

• A) Cash receipts journal to the sales journal.
• B) Sales journal to the cash receipts journal.
• C) Shipping documents to the accounting records.
• D) Accounting records to the shipping documents.

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Definitions:

Activity-based Costing Systems

A method in accounting that assigns costs to products or services based on the activities that go into producing them, aiming to provide more accurate costing.

Production Runs

The process of manufacturing a certain quantity of products at one time, often measured as a batch or lot.

Traditional Costing

An accounting method that allocates overhead costs to products based on a predetermined rate, often linked to production volume.

Product Cost Distortions

Refers to the inaccuracies or misallocations of costs to products, leading to incorrect product costing and pricing.