In Obtaining an Understanding of a Manufacturing Entity's Internal Control

question 44

Multiple Choice

In obtaining an understanding of a manufacturing entity's internal control concerning inventory balances, an auditor most likely would:

• A)review the entity's description of inventory policies and procedures.
• B)perform test counts of inventory during the entity's physical count.
• C)analyze inventory turnover statistics to identify slow-moving and obsolete items.
• D)analyze monthly production reports to identify variances and unusual transactions.

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Definitions:

Permanently Attached

Describes an item or fixture that is fixed securely to a property in such a way that its removal would cause damage to the property or the item itself.

Tenancy at Will

A rental agreement in which either the landlord or the tenant can terminate the lease at any time with sufficient notice, without cause.

Terminate the Tenancy

The legal process of ending a rental agreement or lease, either by the landlord or the tenant, under terms specified by the agreement or law.

Life Estate

An interest in land that exists only for the duration of the life of a specified individual, usually the holder of the estate.