In Determining the Level of Audit Efficiency, Once the Auditor

question 40

Multiple Choice

In determining the level of audit efficiency, once the auditor has identified the key internal controls and identified any deficiencies in order to determine the level of control risk appropriate for a private company client, it is appropriate to decide whether:

• A)substantive tests can be reduced sufficiently to justify costs of performing tests of controls.
• B)substantive tests can be increased sufficiently to justify costs of performing tests of controls.
• C)tests of controls can be increased sufficiently to justify costs of performing substantive tests.
• D)tests of controls can be reduced sufficiently to justify costs of performing substantive tests.

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Definitions:

Sales Budget

An estimate of future sales, often detailed in terms of volume and revenue, used for planning and controlling a business's operations.

Cash Collections

The process of gathering all cash received from sales, receivables, and other sources during a given period.

Direct Materials

Basic substances used explicitly in the manufacturing of certain products or services.

Production Budget

A financial plan that outlines the cost of producing the goods or services a company plans to sell, including direct labor, materials, and overhead.