Auditors, as Part of Completing the Audit, Will Request the Client

question 78

Multiple Choice

Auditors, as part of completing the audit, will request the client to send a letter of inquiry to those attorneys the company has been consulting with during the year under audit regarding legal matters of concern to the company.The primary reason the auditor requests this information is to:

• A)determine the range of probable loss for asserted claims.
• B)corroborate of information supplied by management concerning litigation, claims, and assessments.
• C)outside opinion of probability of losses in determining accruals for contingencies.
• D)outside opinion of probability of losses in determining the proper footnote disclosure.

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Definitions:

Direct Cost

Costs directly associated with the creation of specific products or services, including raw materials and wages.

Prime Costs

The combined costs of raw materials and direct labor that are directly attributable to the production of goods.

Conversion Costs

The costs incurred to convert raw materials into finished products, including labor and manufacturing overhead expenses.

Factory Overhead

Indirect manufacturing costs not directly linked to the production of goods, such as rent, utilities, and maintenance.