Most Auditors Would Use a Higher Inherent Risk for Inventory

question 59

Multiple Choice

Most auditors would use a higher inherent risk for inventory when:

• A) inventory turnover slowed during the year.
• B) obsolete inventory has been identified.
• C) there is a large number of errors in the previous year.
• D) both A and C

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Definitions:

Dividends

Dividends are a portion of a company's earnings that are paid to shareholders, typically on a quarterly basis, as a reward for investing in the company's equity.

Agency Relationships

Refers to the connection between principals (such as shareholders) and agents (such as company executives), where agents are expected to act in the best interests of principals.

Owner/Managers

Individuals who both own and actively manage a company, blending ownership and operational responsibilities.

Shareholders

Individuals or entities that own shares in a corporation, giving them partial ownership and possibly rights to dividends and voting in company matters.