An Internal Auditor Found That the Cost of Some Material

question 381

Multiple Choice

An internal auditor found that the cost of some material installed on capital projects had been transferred to the inventory account because the capital budget had been exceeded. Which of the following would be an appropriate technique for the auditor to use to determine the extent of the problem?

• A) Identify variances between amounts capitalized each month and the capital budget.
• B) Analyze a sample of capital transactions each quarter to detect instances in which installed material was transferred to inventory.
• C) Review all journal entries that transferred costs from capital to inventory accounts.
• D) Compare inventory receipts with debits to the inventory account and investigate discrepancies.

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Definitions:

Grapevine

Informal communication network within an organization, known for spreading rumors and unofficial information rapidly.

Text Messaging

The act of sending short, digital messages between mobile devices over a network.

Oral Communication

The process of verbally transmitting information and ideas from one individual or group to another.

Visual Literacy

The ability to interpret, negotiate, and make meaning from information presented in the form of images, extending the meaning of literacy beyond just words.