The Auditor May Be Able to Use Computer Software to Test

question 18

True/False

The auditor may be able to use computer software to test the accuracy of each customer's account balance by taking each customer's beginning balance, adding sales made on account, subtracting payments received, and adding/subtracting other account adjustments to calculate each customer's ending balance.

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Definitions:

LIFO Reserve

The difference in value between inventory calculated using the Last-In, First-Out (LIFO) method and the First-In, First-Out (FIFO) method, used to adjust COGS and inventory valuation.

Cost of Goods Sold

An accounting term for the direct costs attributable to the production of the goods sold by a company, including materials and labor.

FIFO Costs

FIFO (First In, First Out) Costs refer to an accounting method where the goods first added to inventory are the first to be sold.

LIFO Cost

An inventory valuation method ("Last In, First Out") that assumes the most recently acquired items are the first to be sold, affecting the cost of goods sold and inventory value.