Which of the Following Is Correct Concerning Requirements About Auditor

question 39

Multiple Choice

Which of the following is correct concerning requirements about auditor communications about fraud?

• A)Fraud that involves senior management should be reported directly to the audit committee regardless of the amount involved.
• B)All fraud with a material effect on the financial statements should be reported directly by the auditor to the Securities and Exchange Commission.
• C)Fraud with a material effect on the financial statements should ordinarily be disclosed by the auditor through use of an "emphasis of a matter" paragraph added to the audit report.
• D)The auditor has no responsibility to disclose fraud outside the entity under any circumstances.

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Definitions:

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost allotted for the actual production achieved, indicating the efficiency of utilizing variable resources.

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the expected quantity, valued at standard cost.

Favorable

A term used in variance analysis indicating that actual costs were lower than budgeted or standard costs, leading to higher profits.

Unfavorable

A term used in variance analysis to describe a situation where actual results are worse than expected results, often leading to a negative impact on financial performance.