Which One of the Following Is the BEST Audit Procedure

question 49

Multiple Choice

Which one of the following is the BEST audit procedure for the discovery of damaged merchandise in a client's ending inventory?

• A) Compare the physical quantities of slow- moving items with corresponding quantities of the prior year.
• B) Review the management's inventory representation letter for accuracy.
• C) Test overall fairness of inventory values by comparing the company's turnover ratio with the industry average.
• D) Be alert for items that are located in inappropriate places while observing the client's physical inventory count.

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Definitions:

Market Risk

The potential for investors to lose money due to fluctuations in market prices.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates that the stock is more volatile than the market.

Market Risk Premium

It is the extra return investors expect from holding a risky market portfolio instead of risk-free assets.

Required Rates Of Return

The minimum annual percentage earned by an investment that will entice individuals or companies to put money into a particular project or investment.