In Auditing a Manufacturing Entity, Which of the Following Procedures

question 32

Multiple Choice

In auditing a manufacturing entity, which of the following procedures would an auditor least likely perform to determine whether slow-moving, defective, and obsolete items included in inventory are properly identified?

• A) Test the computation of standard overhead rates.
• B) Tour the manufacturing plant or production facility.
• C) Compare inventory balances to anticipated sales volume.
• D) Review inventory experience and trends.

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Definitions:

Investing Activity

Transactions involving the purchase and disposal of long-term assets and other investments, not including cash equivalents, part of a company’s cash flow statement.

Other Income

Revenue from non-primary business activities, such as rent, patents, or interest earnings, not related to the company's main business operations.

Gain on Sale

The profit realized when an asset is sold for a price higher than its book value.

Indirect Method

A cash flow statement methodology that adjusts net income for changes in non-cash transactions and working capital to calculate cash flow from operating activities.