Inherent Risk Is Reduced Where the Likelihood of Misstatement Is

question 21

Multiple Choice

Inherent risk is reduced where the likelihood of misstatement is low. This would be true for accounts receivable if:

• A) most balances in accounts receivable were from overseas customers.
• B) most balances in accounts receivable were from related parties.
• C) most balances in accounts receivable were overdue.
• D) most balances in accounts receivable were current.

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Definitions:

Physical Inventory Count

A physical inventory count is the process of manually counting all merchandise or stock in a business to verify records and manage inventory levels.

Cost Of Inventory

The total cost incurred to acquire, produce, and place inventory items available for sale, including purchase price, shipping, handling, and storage.

Cost Of Goods Sold

An expense representing the total cost of materials and labor required to produce goods that have been sold in a given period.

Inventory

Assets in the form of materials, work-in-progress, or finished goods held by a company to be sold in the ordinary course of business.