The Auditor's Responsibility Related to Related Party Relationships and Transactions

question 65

Multiple Choice

The auditor's responsibility related to related party relationships and transactions is

• A)to obtain an understanding of related party relationships and transactions sufficient to determine if fraud is present
• B)to obtain an understanding of related party relationships and transactions sufficient to determine if misstatements are present
• C)to obtain an understanding of related party relationships and transactions sufficient to determine if fraud risk factors are present
• D)to obtain sufficient appropriate audit evidence about whether related party relationships and transactions have been properly classified in the financial statements
• E)to obtain sufficient appropriate audit evidence about whether related party relationships and transactions have been appropriately identified,accounted for,and disclosed in the financial statements
• F)both A and B
• G)both C and E
• H)both D and E

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Definitions:

Fixed Manufacturing Overhead

The portion of total manufacturing overhead costs that remains constant regardless of the level of production, such as factory rent or salaries of permanent staff.

Direct Materials

Ingredients or substances that are directly linked to the manufacturing of a particular item.

Relevant Range

The range of activity within which the assumptions about variable and fixed cost behavior are valid for the purposes of cost estimation and budgeting.

Total Fixed Costs

The sum of all costs that do not change with the level of production or sales over a certain period.