The Costs Used to Value the Physical Inventory Must Be

question 85

Multiple Choice

The costs used to value the physical inventory must be tested to determine whether the client has correctly followed an inventory method that is in accordance with accounting standards and is consistent with previous years.The audit procedures used to verify these costs are referred to as:

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

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Definitions:

Volatility

In financial contexts, volatility refers to the degree of variation of a trading price series over time, which is usually measured by the standard deviation of log returns.

Call Increases

Typically refers to an increase in the price of call options, which are contracts that give the holder the right to buy the underlying asset at a specified price.

Wasting Asset

An asset that inexorably declines in value over time due to physical deterioration or the expiration of intangible rights.

Put Option

An option that gives the owner the right, but not the obligation, to sell an asset.