When a Client Uses Perpetual Inventory Records, the Tests of Details

question 107

Multiple Choice

When a client uses perpetual inventory records, the tests of details of balances for inventory can be significantly reduced if the auditor believes the records are accurate. The controls over the acquisitions included in the records are normally tested as a part of the

• A) tests of controls for acquisitions.
• B) tests of controls and substantive tests of transactions for acquisitions.
• C) tests of details of balances for acquisitions.
• D) analytical procedures and tests of controls for acquisitions.

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Definitions:

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Substitution Effect

Refers to the change in consumption patterns due to a change in the relative prices of goods, holding the consumer's utility constant.

Consumption Bundle

A collection of goods or services that an individual or household consumes within a given period.

Utility Function

A mathematical model in economics that maps a consumer's preferences for various products and services to a numerical representation of utility or satisfaction.