You Are Auditing the Inventory Account and Are Concerned About

question 10

Multiple Choice

You are auditing the inventory account and are concerned about the possibility of an inventory overstatement. What is the best audit procedure to detect damaged inventory?

• A) Observe the condition of inventory during the client's physical count.
• B) Compare the condition of inventory from the previous year's count to the current year.
• C) Compare inventory turnover from the previous year's inventory to the current year's inventory.
• D) Reconcile the inventory counts to the cost accounting records.

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Definitions:

Revenue Equation

An equation that calculates the total income generated from selling goods or services, often represented as Revenue = Price x Quantity.

Convenience Samples

A sampling method where participants are selected based on their convenience or accessibility to the researcher.

Fixed Expenses

Costs that do not fluctuate with the volume of business or level of activity within a short period.

Breakeven Point

When the expenses and the revenue are equal, so that there is no profit or loss.