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:

Social Learning Theory

A theory that proposes people learn new behaviors through observation and imitation of others, reinforced by external rewards or punishments.

Intermittent Reinforcement

A conditioning schedule where reinforcements are given on a partial or unpredictable basis, significantly affecting learning and behavior persistence.

Continuous Reinforcement

Continuous reinforcement is a learning strategy where a desired behavior is rewarded every time it occurs, leading to quicker learning of the behavior.

Observable Behavior

Actions or conduct that can be seen and measured externally, as opposed to thoughts or feelings that cannot be directly observed.