In Obtaining an Understanding of a Manufacturing Entity's Internal Control

question 575

Multiple Choice

In obtaining an understanding of a manufacturing entity's internal control concerning inventory balances, an auditor most likely would:

• A) Review the entity's descriptions of inventory controls.
• B) Perform test counts of inventory during the entity's physical count.
• C) Analyze inventory turnover statistics to identify slow-moving and obsolete items.
• D) Analyze monthly production reports to identify variances and unusual transactions.

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Definitions:

Insurance Policy

A contract between an insurer and a policyholder, specifying the terms under which the insurer agrees to compensate the policyholder for specified losses or damages.

Door-to-Door

Door-to-door refers to a direct selling method where salespeople visit potential customers in their homes or offices to sell products or services.

Service Salesperson

A professional who specializes in selling intangible products, such as service contracts or subscriptions.

Tangible Goods

Physical items that can be seen, touched, and possessed, including things like electronics, clothing, and furniture.