Which of the Following Would the Auditor Most Likely Do

question 69

Multiple Choice

Which of the following would the auditor most likely do when testing the existence assertion for inventory?

• A)Observe the client's count of the annual physical inventory and perform test counts.
• B)Review vendor invoices for the amounts recorded.
• C)Review open purchase orders at year-end.
• D)Trace raw material purchases to invoices and to the general ledger.

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Definitions:

Net Sales

the revenue generated from the sale of goods or services, after deducting returns, allowances for damaged or missing goods, and discounts.

Acid Test Ratio

A financial metric used to determine a company's liquidity by comparing its most liquid assets (excluding inventory) to its short-term liabilities.

Straight-Line Method

A depreciation technique that allocates an equal amount of depreciation each year over an asset's useful life.

Scrap Value

The estimated value that an asset will realize upon its sale at the end of its useful life.