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:

Unreasonably Dangerous

A legal term describing a product or condition that poses a significant risk of harm to people or property.

Protruding

Extending out or projecting in space.

Punitive Damages

Financial compensation awarded in a lawsuit that exceeds simple compensation and is intended to punish the defendant for egregious conduct.

Product Liability

The legal obligation of manufacturers and sellers to compensate for losses or injuries caused by defects or malfunctions of their products.