Define Internal Control and Its Purpose, and Describe the Auditor's

question 16

Essay

Define internal control and its purpose, and describe the auditor's responsibility with respect to internal control.

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Definitions:

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to allocate manufacturing overhead costs to individual units of product based on a certain activity, like labor hours.

Direct Labor-Hours

A measure of the time employees who work directly in the production of goods spend on a specific job or product, used to allocate labor costs in job costing.

Machine-Hours

A measure of the amount of time machines are used in the production process, often used to allocate manufacturing overhead costs.

Machining Department

A division within a manufacturing facility where machines are used to process materials into finished products.