Substantive Tests of Costs and Expenses That Are Always Performed

question 17

Multiple Choice

Substantive tests of costs and expenses that are always performed include:

• A) reviewing interim financial statements and investigating fluctuations or the absence of expected changes.
• B) comparing the current year's expenses to the prior year's actual and the current year's budgeted amounts.
• C) obtaining detailed analysis of selected costs and expense accounts and tracing the details to the source data.
• D) all of the above.

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Definitions:

Deferred Gross Profit

The portion of gross profit on installment sales that is not recognized immediately but is deferred until cash is received.

Cost Recovery Method

An accounting method where profits are not recognized until all the costs of the goods sold are recovered.

Sales Price

The amount of money for which a product is sold to customers.

Transfer of Risks

The process in contracts where the risk of loss or damage to goods passes from the seller to the buyer.