Which of the Following Auditing Procedures Probably Would Provide the Most

question 55

Multiple Choice

Which of the following auditing procedures probably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?

• A)Trace test counts noted during the entity's physical count to the entity's summarization of quantities.
• B)Inspect agreements to determine whether any inventory is pledged as collateral or subject to any liens.
• C)Select the last few shipping documents used before the physical count and determine whether the shipments were recorded as sales.
• D)Inspect the open purchase order file for significant commitments that should be considered for disclosure.

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Definitions:

Service Departments

Units within an organization that support other departments but do not directly contribute to revenue generation, such as human resources or IT services.

Market Value

The current price at which an asset or service can be bought or sold in a marketplace.

Split-off

A point in the production process in a joint production system where two or more products become individually identifiable and their costs can be separately allocated.

Production Work

The tasks and activities involved in manufacturing products, including assembly and processing materials.