An Accountant Has Been Engaged to Report on an Entity's

question 15

Multiple Choice

An accountant has been engaged to report on an entity's internal controls without performing an audit of the financial statements.What restrictions,if any,should the accountant place on the use of this report?

• A) This report should be restricted for use by management.
• B) This report should be restricted for use by the audit committee.
• C) This report should be restricted for use by a specified regulatory agency.
• D) The accountant does not need to place any restrictions on the use of this report.

---

Definitions:

Variable Costs

Expenses that fluctuate in direct proportion to changes in productive output or other measures of volume.

Operating Leverage

Operating leverage refers to the extent to which a company can increase its operating income by increasing revenue, highlighting the proportion of fixed costs in a company's cost structure.

Capital Intensive

A business process or industry that requires significant financial investment in capital assets like machinery and equipment, versus labor or operational costs.

Fixed Costs

Expenses that do not change with the level of production or business activity.