As Part of the Audit of Valuation, the Auditor Is

question 29

Multiple Choice

As part of the audit of valuation, the auditor is conducting pricing tests by comparing to supplier invoices. The auditor is making sure that, for each item tested, sufficient supplier invoices are examined to cover the quantity of inventory that was on hand during the physical inventory count. What type of pricing error could this detect?

• A) the client valued their inventory on the basis of the most recent invoice only
• B) the client has used the incorrect accounting method to value its inventory
• C) extension errors could occur with numerous different inventory items
• D) the wrong inventory count quantity could have been recorded on the count sheets

---

Definitions:

Production Method

The process or technique used to create goods or services, which can include aspects of labor, machinery, technology, and inputs.

Marginal Cost Curve

The Marginal Cost Curve graphs the cost incurred by producing one more unit of a good, typically showing how this cost changes with increased production.

Total Utility

The utmost satisfaction achieved from utilizing a specified amount of goods or services.

Limited Income

Describes a situation where an individual or household has a finite or restricted amount of monetary resources available for spending and saving.