What Is the Most Likely Course of Action That an Auditor

question 588

Multiple Choice

What is the most likely course of action that an auditor would take after determining that performing substantive tests on inventory will take less time than performing tests of controls?

• A) Assess control risk at a low level.
• B) Perform both tests of controls and substantive tests on inventory.
• C) Perform only substantive tests on inventory.
• D) Perform only tests of controls on inventory.

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Definitions:

Perpetual

A system of inventory management where records are updated immediately following a sale or purchase of goods.

Merchandise Inventory

The total value of a business's commodities or goods available for sale to customers at any given time.

Accounts Payable

The amount owed by a business to its suppliers or creditors for goods and services received but not yet paid for.

Cash

A current asset account that represents currency or currency equivalents that can be accessed immediately or near-immediately.