A Common Inventory Observation Procedure Is to Be Alert for Items

question 40

Multiple Choice

A common inventory observation procedure is to be alert for items that are damaged, rust- or dust-covered, or located in inappropriate places. The balance-related audit objective being achieved by this procedure is

• A) classification.
• B) cutoff.
• C) realizable value.
• D) rights.

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Definitions:

Variable Costs

Costs that fluctuate in direct proportion to the amount of production or sales figures.

Fixed Costs

Overhead expenses that remain consistent regardless of changes in the level of production or sales activities.

Relevant Range of Operations

The range of activity within which the assumptions about variable and fixed cost behavior are valid, used for budgeting and planning purposes.