Tests of Controls and Substantive Tests of Transactions Are an Important

question 119

Multiple Choice

Tests of controls and substantive tests of transactions are an important determinant of the extent of the auditor's use of tests of details of balances. Which of the following is true?

• A) They are likely to be performed prior to the client's end of the fiscal year.
• B) They are likely to eliminate the need for tests of details of balances.
• C) They are likely to have no impact on the planned tests of details of balances.
• D) They are likely to be used only in the audit of internal control.

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Definitions:

Break-even Point

The level of sales at which total costs equal total revenue, resulting in no net profit or loss.

Target Profit

The desired profit figure set by a business, which guides pricing, production, and marketing decisions.

Unit Sales

The total quantity of an item or product sold in a particular period.

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs have been deducted, contributing towards covering fixed costs and generating profit.