If the Auditor Is Testing the Reasonableness of Depreciation Expense

question 59

Multiple Choice

If the auditor is testing the reasonableness of depreciation expense for the year,which assertion is being tested?

• A)Completeness.
• B)Rights and obligations.
• C)Existence.
• D)Valuation.

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Definitions:

Factory Overhead

All indirect costs related to the production process, such as utilities, maintenance, and supervision, not directly tied to specific units produced.

Factory Burden

Another term for manufacturing overhead, encompassing all indirect costs involved in operating a factory, excluding direct materials and labor costs.

Surplus

The amount by which a company's income exceeds its spending, or in a broader sense, an excess of assets over liabilities.

Conversion Costs

The combined costs of direct labor and manufacturing overhead incurred to convert raw materials into finished products.