When Auditing Merchandise Inventory at Year-End,the Auditor Performs a Purchase

question 16

Multiple Choice

When auditing merchandise inventory at year-end,the auditor performs a purchase cutoff test to obtain evidence that

• A)all goods purchased before year-end are received before the physical inventory count.
• B)no goods held on consignment for customers are included in the inventory balance.
• C)no goods observed during the physical count are pledged or sold.
• D)all goods owned at year-end are included in the current period inventory balance.

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Definitions:

Controlling Interest

Ownership interest in a business entity that gives the holder the power to direct or influence the direction of management and policies.

Consolidation Worksheet

An instrument utilized for creating combined financial reports that merges the finances of a parent entity with those of its subsidiary companies.

Goodwill Impairment

An accounting process involving the reassessment of the value of goodwill on the balance sheet and reducing it if its market value has declined below the carrying value.

Noncontrolling Interest

Noncontrolling interest is a financial stake in a subsidiary held by investors other than the parent company, reflecting their share of the subsidiary's net assets and earnings.