The Existence of an Adequate Storeroom with a Competent Custodian

question 25

Multiple Choice

The existence of an adequate storeroom with a competent custodian in charge results in the orderly storage of inventory and can protect inventory from theft and misuse.How would an auditor assess these controls?

• A)observation during the audit and inquiry of the accounting staff
• B)inquiry of the accounting staff and inspection of theft statistics
• C)observation during the inventory count and inquiry of inventory personnel
• D)inspection of inventory damage statistics and inquiry of inventory personnel

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Definitions:

Return on Equity

A measure of financial performance calculated by dividing net income by shareholder's equity, indicating how well a company uses investments to generate earnings growth.

Total Debt

The sum of all owed liabilities, both current and long-term, that a company must eventually pay back.

Cash Coverage Ratio

A financial metric that measures a company's ability to cover its debt obligations with its available cash and cash equivalents.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations by comparing net income before interest and taxes to its interest expenses.