To Best Ascertain That a Company Has Properly Included Merchandise

question 77

Multiple Choice

To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditor should review and test the

• A) terms of the open purchase orders.
• B) purchase cutoff procedures.
• C) contractual commitments made by the purchasing department.
• D) purchase invoices received on or around year-end.

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Definitions:

Liability

Legal responsibility for one's actions or for a device, product, or process that can cause harm, leading to the obligation to make restitution.

Implied Authority

The power of an agent to perform acts that are reasonably necessary to accomplish the purpose of an agency agreement.

Consolidate

To combine multiple elements into a single, more effective or coherent whole, often used in the context of financial statements or businesses.

Statement of Dissolution

A legal document filed with a government body to officially dissolve a corporation or partnership.