An Inventory Observation Procedure That Compares Physical Counts with the Perpetual

question 21

Multiple Choice

An inventory observation procedure that compares physical counts with the perpetual inventory master file is an attempt to satisfy the audit objective of

• A)existence.
• B)completeness.
• C)accuracy.
• D)classification.

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Definitions:

Working Capital

The contrast between a corporation's immediate financial resources and outstanding obligations, illustrating its short-term monetary health and effectiveness in running its operations.

Net Present Value

A method used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period.

Capital Budgeting

The process of evaluating and selecting long-term investments that are consistent with the firm's goal of wealth maximization.

Discount Rate

The discount rate refers to the interest rate applied in discounted cash flow analysis to calculate the present value of future cash flows.