When Perpetual Inventory Records Are Maintained in Quantities and in Dollars

question 45

Multiple Choice

When perpetual inventory records are maintained in quantities and in dollars and internal control over inventory is weak, the auditor would probably:

• A)want the entity to schedule the physical inventory count at the end of the year.
• B)insist that the entity perform physical counts of inventory items several times during the year.
• C)increase the extent of tests for unrecorded liabilities at the end of the year.
• D)have to disclaim an opinion on the income statement for that year.

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Definitions:

Solver

A feature in software, such as Microsoft Excel, that performs optimization, finding the best solution to a problem given constraints.

Price/Demand Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, often used to understand the sensitivity of consumers to price changes.

Local Optimum Solution

A solution to an optimization problem that is better than or equal to all nearby solutions but not necessarily the best overall, or global, solution.

Nonlinear Optimization Models

Mathematical models where the objective function or any of the constraints are nonlinear, used for solving complex real-world problems.