The Audit of Year-End Physical Inventories Should Include Steps to Verify

question 91

Multiple Choice

The audit of year-end physical inventories should include steps to verify that the client's purchases and sales cutoffs were adequate. The audit steps should be designed to detect whether merchandise included in the physical count at year-end was not recorded as a

• A) sale in the current period.
• B) sale in the subsequent period.
• C) purchase in the current period.
• D) purchase return in the subsequent period.

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Definitions:

Convertible Securities

Convertible securities are financial instruments, like bonds or preferred shares, that can be converted into a predetermined number of another type of security, typically shares of common stock, at the option of the holder or the issuer.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuer's equity shares at certain times during the bond's life, usually at the discretion of the bondholder.

Stockholders' Equity

The residual interest in the assets of a company after deducting liabilities, representing the owners' claim on the business.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) for financial reporting globally.