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:

Common Stock

Equity ownership in a corporation, with voting rights and eligibility to receive dividends.

Convertible Bonds

Bonds that can be converted into a predetermined number of a company's shares, typically at the discretion of the bondholder, blending debt and equity investment characteristics.

Diluted Earnings

A calculation of a company's earnings that takes into account all potential shares that could be claimed or converted into common stock, impacting the earnings per share metric.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, assigning weights to some of the numbers more than others.