Which of the Following Is a Difference Between Audits and Compilations

question 17

Multiple Choice

Which of the following is a difference between audits and compilations?

• A) The auditor's objective is to obtain reasonable assurance that the financial statements are free of material misstatements, whereas the objective of a compilation is to assist management in presenting financial information without obtaining any level of assurance.
• B) Audits do not require an understanding of the entity's internal controls and an assessment of fraud risk, whereas compilations require an understanding of the entity's internal controls and an assessment of fraud risk.
• C) Audits have a narrower scope as compared to reviews, whereas compilations have a broader scope as compared to reviews.
• D) Audits provide a reasonable level of assurance to the users of the financial statements, whereas compilations provide a limited level of assurance to the users of the financial statements.

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Definitions:

Split-off Point

The stage in a process where multiple products become separately identifiable, and each can be processed further or sold.

Processing Further

A decision-making process in cost accounting used to determine whether additional costs should be incurred in further processing products before sale.

Joint Production Cost

Costs incurred in the process of producing multiple products simultaneously from the same raw materials or process.

Grinding Machine Time

The amount of time a grinding machine is used during the production process, often considered in cost calculations for products requiring such processing.