The Auditor Makes the Decision About Which of the Modifications

question 30

Multiple Choice

The auditor makes the decision about which of the modifications is appropriate based on

• A)the conclusiveness of the matter causing the modification,that is,whether the financial statements are materially misstated or whether the auditor is unable to gather sufficient appropriate evidence
• B)the subject of the matter causing the modification on the financial statements
• C)the pervasiveness of the matter causing the modification on the financial statements
• D)the nature of the matter causing the modification,that is,whether the financial statements are materially misstated or whether the auditor is unable to gather sufficient appropriate evidence
• E)the persuasiveness of the matter causing the modification that is,whether the financial statements are materially misstated or whether the auditor is unable to gather sufficient appropriate evidence
• F)both A and B
• G)both B and E
• H)Both C and D

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Definitions:

Absorption Costing

A fiscal recording method that consolidates every cost involved in manufacturing, which includes the price of direct materials, payments for direct labor, and total overhead costs, whether stable or fluctuating, into the cost allocated to a product.

Variable Costing

A costing method that incluonly direct materials, direct labor, and variable manufacturing overhead in product costs, excluding fixed manufacturing overhead.

Total Fixed Manufacturing Overhead

The sum of all costs related to manufacturing a product that do not change with the level of production, such as salaries of permanent staff and rent.

Variable Costing

An accounting method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product costs.