Observation of Inventories Is a Required Audit Procedure Whenever

question 75

Multiple Choice

Observation of inventories is a required audit procedure whenever:

• A) inventories are material.
• B) inventories are material and it is practicable and reasonable.
• C) it is practicable and reasonable.
• D) the auditor considers it to be necessary.
• E) inventories are material and the auditor considers it to be necessary.

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Definitions:

Loss Contingency

A potential financial loss that might occur in the future, dependent on the outcome of a specific event, recorded in accounting if it is probable and the amount can be reasonably estimated.

U.S. GAAP

United States Generally Accepted Accounting Principles, the collection of rules and procedures designed to ensure consistency and transparency in financial reporting.

Estimated Cost

A projection or approximation of the future cost associated with a product, service, project, or investment, often used for budgeting purposes.

Provision

A provision is an amount set aside in the financial statements to cover a future liability or loss.