Following Are the Planning Steps Involved in Considering Materiality in a Top-Down

question 16

Essay

Following are the planning steps involved in considering materiality in a top-down approach to planning for tests of controls. Number the items in from 1 (top) through 6 (bottom) to indicate the proper top-down sequence of the steps.
___ Identify risks that could cause material misstatement of relevant assertions in a significant account.
___ Set financial statement level materiality
___ Design audit procedures addressing controls
___ Investigate controls addressing risks
___ Identify significant accounts
___ Determine relevant management assertions for significant accounts and set materiality at the account level

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Definitions:

Total Overhead Applied

The sum of all overhead costs that have been allocated to products or services based on a predetermined overhead rate.

Overhead Assigned

The process of allocating indirect costs to specific cost objects, such as products, services, or departments.

Direct Labor-Hours

Direct labor-hours represent the total hours worked by employees directly involved in the manufacturing process, serving as a basis for allocating labor costs to products.

Traditional Costing

An accounting method that allocates manufacturing overhead based on the volume of a cost driver, such as the amount of labor or materials used.