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Exam Code: CLF-C01
Exam Name: Amazon AWS Certified Solutions Architect - Cloud Practitioner
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NEW QUESTION: 1
The internal auditing department has been assigned to perform an audit of a division. Based on background review, the auditor knows the following about management policies:
Company policy is to rapidly promote divisional managers who show significant success. Thus, successful managers rarely stay at a division for more than three years.
A significant portion of division management's compensation comes in the form of bonuses based on the division's profitability.
The division was identified by senior management as a turnaround opportunity. The division is growing, but is not scheduled for a full audit by the external auditors this year. The division has been growing about 7% per year for the past three years and uses a standard cost system.
During the preliminary review, the auditor notes the following changes in financial data compared to the prior year:
Sales have increased by 10%.
Cost of goods sold has increased by 2%.
Inventory has increased by 15%.
Divisional net income has increased by 8%.
If the auditor decides that there are significant problems with the standard cost system, the next audit step to perform would be to
A. Use generalised audit software to prepare a listing of gross margin by product by comparing standard cost with sales price. Select all high-gross-margin items for further investigation.
B. Schedule all variances and determine their source and their disposition, that is, whether they are allocated to inventory or cost of goods sold.
C. Select a random sample of products and review the standard cost build-up by tracing purchases to the standard cost record.
D. Interview divisional management to determine why the standard cost system has not been updated on a timely basis.
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