The Fourth PCAOB Reporting Standard Requires the Auditor's Report to Contain

question 48

Multiple Choice

The fourth PCAOB reporting standard requires the auditor's report to contain either an expression of opinion regarding the financial statements taken as a whole or an assertion to the effect that an opinion cannot be expressed.The objective of the fourth standard is to prevent

• A) An auditor from reporting on one basic financial statement and not the others.
• B) An auditor from expressing different opinions on each of the basic financial statements.
• C) Management from reducing its final responsibility for the basic financial statements.
• D) Misinterpretations regarding the degree of responsibility the auditor is assuming.

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Definitions:

Cost of Goods Manufactured

The total cost incurred by a company to produce goods in a specific period, including materials, labor, and overhead costs.

Manufacturing Overhead

This encompasses costs related to the manufacturing process that are not directly associated with the products being manufactured, such as equipment depreciation and factory rent, essential for understanding total production costs.

Indirect Production Costs

Expenses related to the production process that cannot be directly linked to a specific product, often including maintenance, supervision, and factory utilities.

Direct Material

Raw materials that are directly traceable to the manufacturing of a specific product and constitute a significant portion of the product's cost.