A Useful Starting Point for Becoming Familiar with the Client's

question 27

Multiple Choice

A useful starting point for becoming familiar with the client's inventory is for the auditor to

• A) read the AICPA's Industry Audit Guide.
• B) review accounting theory covering special inventory problems.
• C) read the client's accounting manual.
• D) tour the client's facility.

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Definitions:

Reportable

Refers to information or events significant enough to be mentioned or included in financial statements or reports.

Operating Segments

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.

Testing

The process of evaluating a system or its component(s) to determine whether it meets specified requirements.

Economic Environment

The Economic Environment consists of all external economic factors, such as inflation, unemployment, and economic policies, that influence a business's operating conditions and financial performance.