"In Connection with an Audit of Our Financial Statements, Management

question 902

Multiple Choice

"In connection with an audit of our financial statements, management has prepared, and furnished to our auditors a description and evaluation of certain contingencies." The foregoing passage most likely is from a(an) :

• A) Audit inquiry letter to legal counsel.
• B) Management representation letter.
• C) Audit committee's communication to the auditor.
• D) Financial statement footnote disclosure.

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Definitions:

Retail Inventory Method

An accounting method used by retailers to estimate inventory cost by using a cost-to-retail price ratio based on both beginning inventory and purchases during the period.

Ending Inventory

The total value of all inventory a company has available for sale at the end of an accounting period.

Average Cost

A method of inventory costing that determines the cost of goods sold and ending inventory based on the weighted average cost of all purchases.

Gross Profit Method

A technique used to estimate the amount of ending inventory using the gross profit margin.