The Auditor Must Verify Whether the Physical Counts Were Correctly

question 127

Multiple Choice

The auditor must verify whether the physical counts were correctly summarised, the inventory quantities and prices were correctly extended and the extended inventory was correctly footed. These tests are called:

• A) compilation tests.
• B) price tests.
• C) cost tests.
• D) mechanical tests.

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Definitions:

Marketable Securities

Financial instruments that are easily convertible to cash and are subject to minimal price risk.

Amortized Cost

The amount at which a financial asset or liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortization using the effective interest method.

Trading Securities

Financial instruments that are purchased and held primarily for selling them in the near term to generate income on short-term price differences.

Marketable Securities

Financial instruments that can be easily converted into cash, typically with high liquidity and short-term maturities.