The Auditor's Tests of the Adequacy of the Physical Controls

question 3

Multiple Choice

The auditor's tests of the adequacy of the physical controls over raw materials,work-in-process,and finished goods are usually limited to

• A)observation and inquiry.
• B)inspection and observation.
• C)inspection and confirmation.
• D)inspection and inquiry.

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Definitions:

Transfer

The act of moving or conveying something from one place, person, or entity to another.

Capital Surplus

The amount of equity in a company that is derived from contributions by shareholders in excess of the par value of the shares.

Par Value

The nominal or face value of a stock or bond as stated by the issuer.

Cash Flow Test

A financial analysis method to determine the liquidity of a company by measuring the cash it generates or uses in its operations.