All of the Following Are Required by the Auditor Before

question 39

Multiple Choice

All of the following are required by the auditor before allowing the client to take inventory before year-end except which one?

• A)absence of "red flags".
• B)internal control is weak.
• C)the auditor can effectively test the year-end balance through a combination of analytical procedures and selective testing of transactions between the physical count and the year-end.
• D)the auditor reviews the intervening transactions for evidence of any manipulation or unusual activity.

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Definitions:

Variable Costing

An accounting method that only includes variable costs (costs that vary with production levels) in product costs and treats fixed costs as period costs expensed in the period incurred.

Manufacturing Margin

The difference between the sales revenues generated from manufactured goods and the cost of goods sold, indicating the profitability of production.

Contribution Margin

The difference between the sales revenue generated from a product or service and the variable costs associated with its production and sales.

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of goods sold and excludes fixed manufacturing overhead.