An Auditor Has Been Asked to Report on the Balance

question 53

Multiple Choice

An auditor has been asked to report on the balance sheet of Kane Company but not on the other basic financial statements. The auditor will have access to all information underlying the basic financial statements. Under these circumstances, the auditor:

• A) may accept the engagement because such engagements merely involve limited reporting objectives.
• B) may accept the engagement but should disclaim an opinion because of an inability to apply the procedures considered necessary.
• C) should refuse the engagement because there is a client-imposed scope limitation.
• D) should refuse the engagement because of a departure from generally accepted auditing standards.

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Definitions:

Average Total Cost (ATC)

The total cost of production divided by the quantity of output produced, representing the per-unit production cost.

Total Variable Cost

The sum of those costs that rise as output increases. Examples of variable costs are wages paid to workers and payments for raw materials.

Output

The total amount of goods or services produced by a company, sector, or economy during a specific period.

Per-Unit Cost of Production

The average cost incurred in producing one unit of a good or service, including all variable and fixed costs.