An Operational Audit Differs in Many Ways from an Audit

question 42

Multiple Choice

An operational audit differs in many ways from an audit of financial statements. Which of the following is the best example of one of these differences?

• A) The usual audit of financial statements covers the four basic statements, whereas the operational audit is usually limited to either the balance sheet or the income statement.
• B) The boundaries of an operational audit are often drawn from an organization chart and are not limited to a single accounting period.
• C) Operational audits do not ordinarily result in the preparation of a report.
• D) The operational audit deals with pre-tax income.

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Definitions:

Direct Labor-Hours

The total time workers spend producing a product or service, directly involved in the manufacturing or production process.

Variable Overhead

Costs that fluctuate with the level of production output, such as utilities for a manufacturing plant, which increase as production increases.

Direct Materials

Raw materials that can be directly associated with the production of specific goods or services and are a major component of total manufacturing costs.

Direct Labor-Hours

A measure of the time workers spend directly manufacturing a product, used in calculating labor costs and efficiency.