The Auditor Has Determined That the Perpetual Inventory Master Files

question 43

Multiple Choice

The auditor has determined that the perpetual inventory master files are high quality,assessing control risk related to physical observation of inventory as low.How does this affect audit testing? The auditor may

• A)reduce the extent of control tests over data entry to the master file.
• B)reduce the extent of the tests of physical inventory.
• C)reduce the extent of control tests with respect to program change controls.
• D)increase assessed inherent risks over the tests of physical inventory.

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Definitions:

Quoted Price

The last price at which a security or commodity was traded and is publicly available.

Par Value

The face value of a bond or stock as stated by the issuer, which has implications for interest calculations or dividends.

Yield to Maturity

Yield to Maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures, considering all payments from now until maturity, including coupon payments and the difference between the purchase price and the par value.

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the face value, to the bondholders.