What Is the First Step That the Auditor Takes When

question 37

Multiple Choice

What is the first step that the auditor takes when auditing the valuation of inventory?

• A)Conduct analytical review,comparing gross margin for the current year to the prior year.
• B)Do an industry analysis to determine whether there is a potential for technology-induced obsolescence.
• C)Ask the client about the level of obsolete inventory that was on hand and counted during the inventory count.
• D)Clearly establish the valuation method used and how the calculations are being performed.

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Definitions:

Simple Correlation Analysis

A statistical technique that measures the strength and direction of a linear relationship between two continuous variables.

Multiple Correlation Analysis

A statistical method used to understand the relationship between one dependent variable and two or more independent variables.

Variables

Represent individual data points or attributes that can change and be measured or observed.

MSE

Mean Squared Error, a measure of the average of the squares of the errors—that is, the difference between the estimator and what is estimated.