As Part of an Operational Audit, an Auditor Compared Records

question 172

Multiple Choice

As part of an operational audit, an auditor compared records of current inventory with usage during the prior two-year period and determined that the spare parts inventory was excessive. What step should the auditor perform first?

• A) Determine the effects of a stock-out on the organization's profitability.
• B) Determine whether a clear policy exists for setting inventory limits.
• C) Determine who approved the purchase orders for the spare parts.
• D) Determine whether purchases were properly recorded.

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Definitions:

Simple Majority Vote

A voting method where the choice receiving more than half of the votes wins, as opposed to an absolute majority that may require a higher threshold.

Operating Agreement

An agreement containing various rights, provisions, and powers that aid in establishing the bylaws of an LLC.

Legal Rights

Rights bestowed upon individuals or entities by the law, protecting their interests and enforcing duties upon others.

Asset Acquisition

The purchase of all the property of a corporation by another corporation.