A Client Maintains Perpetual Inventory Records in Both Quantities and Dollars

question 494

Multiple Choice

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

• A) Increase the extent of tests of controls of the inventory cycle.
• B) Request the client to schedule the physical inventory count at the end of the year.
• C) Insist that the client perform physical counts of inventory items several times during the year.
• D) Apply gross profit tests to ascertain the reasonableness of the physical counts.

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Definitions:

LIBOR

The London Interbank Offered Rate, a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.

Euribor

The Euro Interbank Offered Rate, which is the benchmark rate of the average interest rate at which major global banks lend to one another.

Treasury Bond

A long-term, fixed-interest U.S. government debt security with a maturity of more than ten years.

Ask Price

The lowest price a seller is willing to accept for a security.