If an Auditor Were Concerned with Obtaining Evidence About the Appropriateness

question 102

Multiple Choice

If an auditor were concerned with obtaining evidence about the appropriateness of the value of inventory, which of the following tests would be most appropriate?

• A) compilation tests
• B) price tests
• C) confirmation of inventory held by outside parties
• D) physical examination of the inventory

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Definitions:

Capital Budget

The budgeting process relating to expenses for major capital, or investment, projects and purchases in a company.

Total Dividend Payment

The sum of all dividends that a company pays out to its shareholders for a specific period.

Residual Dividend Policy

A strategy where dividends are based on earnings remaining after all project capital needs are met.

Target Capital Structure

Target capital structure refers to the mix of debt, equity, and other financing sources a company aims to maintain to fund its operations and growth, while optimizing its cost of capital.