With Respect to a Small Company's System of Purchasing Supplies

question 116

Multiple Choice

With respect to a small company's system of purchasing supplies, an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been

• A) requested by and approved by the same individual.
• B) used in the course of business and solely for business purposes during the year under audit.
• C) received, counted, and checked to quantities and amounts on purchase orders and invoices.
• D) properly recorded as assets and systematically amortized over the estimated useful life of the supplies.

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Definitions:

Equity Method

An accounting approach where an investor's share of investee profits or losses is reported in the investor's financial statements.

Acquisition Differential

The difference between the cost of acquiring an entity and the sum of the fair value of identifiable net assets acquired.

Impairment Losses

Financial losses recorded when the carrying amount of an asset exceeds its recoverable amount, indicating that the asset is worth less than its book value.

Amortize

The process of gradually writing off the initial cost of an asset over a period, typically the asset's useful life.