An Auditor Examining Inventory Most Likely Would Use Variables Sampling

question 782

Multiple Choice

An auditor examining inventory most likely would use variables sampling rather than attributes sampling to:

• A) Identify whether inventory items are properly priced.
• B) Estimate whether the dollar amount of inventory is reasonable
• C) Discover whether misstatements exist in inventory records.
• D) Determine whether discounts for inventory are properly recorded.

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Definitions:

Consolidated Sales

The total sales of a parent company and its subsidiaries, after eliminating intercompany sales, reported in the consolidated financial statements.

Normal Markup

The standard amount or percentage added to the cost of a product to determine its selling price.

Common Stock

Equity securities that represent ownership in a company, providing voting rights and a share in the company’s profits through dividends.

Equity Method

A method of accounting for investments, where the investor recognizes its share of investee's profits and losses in its own income statement, typically used when the investor has significant influence over the investee.