The Auditor Must Verify Whether the Physical Counts Were Correctly

question 97

Multiple Choice

The auditor must verify whether the physical counts were correctly summarised, the inventory quantities and prices were correctly extended, and the extended inventory was correctly footed.These tests are called:

• A) cost tests.
• B) mechanical tests.
• C) price tests.
• D) compilation tests.

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Definitions:

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting the usage, wear and tear, or obsolescence of the asset.

Effective Tax Rate

The average percentage that companies or individuals pay in taxes on their total income.

Goodwill

An intangible asset representing the excess of purchase price over the fair market value of identifiable assets and liabilities acquired in a business combination.

Equity Method

An accounting technique used to record investments in other companies, where the investment is initially recorded at cost and adjusted thereafter for the proportionate share of profit or loss and dividends received.