For Infrequently Traded Securities, Which Are Material in Amount, the Auditor

question 22

Multiple Choice

For infrequently traded securities, which are material in amount, the auditor should ordinarily:

• A) estimate the market price themselves
• B) require the security to be classified as a long-term investment.
• C) obtain direct confirmation from an independent broker.
• D) inspect the books of the investee directly.

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Definitions:

Variable Costing

A technique in accounting that encompasses only costs that vary with production (including direct materials, direct labor, and variable manufacturing overhead) in the pricing of products.

Period Cost

Expenses that are not directly tied to the production of goods and are instead associated with time periods, such as administrative salaries.

Variable Costing

A method of cost accounting where only variable production costs are included in product costs, with fixed overhead expenses treated as period costs.

Unit Product Cost

The total cost associated with producing a single unit of a product, calculated by dividing the total production costs by the number of units produced.