Where the Auditor Has Decided to Rely Upon Internal Controls,he

question 50

Multiple Choice

Where the auditor has decided to rely upon internal controls,he or she will then

• A)eliminate the need to gather evidence in that area.
• B)test the effectiveness of the controls in that area.
• C)proceed to expand the sample sizes in that area.
• D)negotiate with management to determine which controls will be tested in that area.

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Definitions:

Cost of Goods Sold

The financial charges directly linked to the fabrication of products sold by a company, involving both materials and labor input.

Net Income

The profit a company retains after all expenses and taxes have been removed from its revenue.

Inventory

A company's merchandise, raw materials, and finished and unfinished products which have not yet been sold.

Perpetual Inventory Method

An inventory management system where updates are made continuously to record sales and purchases instantly, maintaining constant and accurate inventory records.