After Obtaining an Understanding of the Internal Control System and Assessing

question 24

Multiple Choice

After obtaining an understanding of the internal control system and assessing control risk,an auditor decided not to perform additional tests of controls.The auditor most likely concluded that ________.

• A)the additional evidence to support a further reduction in control risk was not cost-beneficial
• B)the assessed level of inherent risk exceeded the assessed level of control risk
• C)the internal control system was properly designed and justifiably may be relied on
• D)the evidence obtainable through tests of controls would not support an increased level of control risk

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Definitions:

Product Cost

The total cost associated with manufacturing a product, including direct materials, direct labor, and manufacturing overhead.

Period Cost

Expenses that are not directly tied to the production process and are expensed in the period they are incurred, such as selling and administrative expenses.

Machinery Repairs

Expenditures incurred in fixing and maintaining machinery to ensure operational efficiency and extend its service life.

Product Cost

The total cost incurred to produce and prepare a product for sale, including materials, labor, and overhead expenses.