A Common Inventory Observation Procedure Is to Select a Random

question 45

Multiple Choice

A common inventory observation procedure is to select a random sample of tag numbers and identify the tag with that number attached to the actual inventory.The audit objective being achieved by this procedure is

• A)inventory as recorded on tags exists (existence).
• B)existing inventory is counted and tagged (completeness).
• C)inventory is counted accurately (accuracy).
• D)inventory is classified correctly (classification).

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Definitions:

Variable Selling

Expenses that change in proportion with the volume of sales, such as commissions or shipping costs.

Special Order

An order for goods or services that is outside the company's normal production or service delivery operations.

Split-off Point

In process costing, the stage in production where multiple products emerge from a single process and continue to be processed further or sold as is.

Joint Production Costs

Costs that are incurred up to the split-off point in a process that produces multiple products.