Which Statement Is Correct Relating to the Count of Inventory

question 14

Multiple Choice

Which statement is correct relating to the count of inventory when a company that specializes in taking such counts ("the company") is involved with counting a client's inventory?

• A)The auditor should consider the company a specialist,and follow the procedures outlined for addressing an auditor's specialist.
• B)The auditor should not consider the counts by the company,by themselves,sufficient appropriate audit evidence.
• C)The auditor must observe all inventory counts taken by the company.
• D)The auditor should observe a letter of representations form the company.

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Definitions:

Deposit

A deposit refers to a sum of money placed into an account or given to another party as security for future transactions, often used in banking, leasing, and rental agreements.

Incremental Pre-tax Profits

Profits generated from a specific event or decision, calculated before taxes are deducted.

DSO

Days Sales Outstanding, a measure of the average number of days that it takes a company to collect payment after a sale has been made.

Bad Debt

A receivable that is considered irrecoverable and is therefore written off as a loss.