When Inventories Are Material and the Auditor Does Not Observe

question 78

Multiple Choice

When inventories are material and the auditor does not observe the inventory at or near the year-end, professional standards require the auditor to:

• A) thoroughly test the accounting records.
• B) observe some physical counts of the inventory.
• C) disclaim an opinion on the financial statements.
• D) resign from the engagement.
• E) reperform the entire inventory count.

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Definitions:

Memory

The cognitive ability to remember and recall previous experiences, events, facts, and impressions.

Negative Reinforcement

A psychological concept where the removal of an unfavorable event or outcome after the display of a behavior increases the likelihood of that behavior being repeated in the future.

Thorndike's Law Of Effect

A psychological principle stating that behaviors followed by satisfying consequences are more likely to be repeated, while those followed by unpleasant consequences are less likely to be repeated.

Skinner's Theory

A theory developed by B.F. Skinner that emphasizes operant conditioning, where behavior is shaped and maintained by its consequences, including reinforcements and punishments.