Which of Management's Assertions with Respect to Implementing Internal Controls

question 85

Multiple Choice

Which of management's assertions with respect to implementing internal controls is the auditor primarily concerned?

• A) efficiency of operations
• B) reliability of financial reporting
• C) effectiveness of operations
• D) compliance with applicable laws and regulations

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Definitions:

Fixed Overhead Rate

A consistent charge that does not fluctuate with the level of output or activity in a given period, used to allocate fixed costs to units of output.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and overhead) in the cost of a product.

Variable Costing

An accounting method that only includes variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product costs, with fixed overhead expenses recorded as period costs.

Inventory

The complete list of items such as property, goods in stock, or the contents of a building.