A Client Maintains Perpetual Inventory Records in Quantities and in Dollars

question 59

Multiple Choice

A client maintains perpetual inventory records in quantities and in dollars. If the assessed control risk is high, an auditor would probably

• A)apply gross profit tests to ascertain the reasonableness of the physical counts.
• B)increase the extent of tests of controls relevant to the inventory cycle.
• C)request the client to schedule the physical inventory count at the end of the year.
• D)insist that the client perform physical counts of inventory items several times during the year.

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Definitions:

Product Samples

Small quantities of a product given away for free to customers for the purpose of trial and evaluation.

Consumer Purchase Tests

Evaluations where consumers are asked to use and assess the value or utility of a product before it is widely marketed.

Misredemption

The act of consumers using coupons, vouchers, or offers in ways not intended by the issuer, leading to financial losses or unintended benefits.

Clearinghouse Costs

Expenses associated with the operation of a clearinghouse, which facilitates the exchange and settlement of financial or commodity transactions.