Cravens Was Asked to Perform the First Audit of a Wholesale

question 42

Multiple Choice

Cravens was asked to perform the first audit of a wholesale business that does not maintain perpetual inventory records. Cravens has observed the current inventory but has not observed the physical inventory at the previous year-end date and concludes that the opening inventory balance, which is not auditable, is a material factor in the determination of cost of goods sold for the current year. Cravens will probably:

• A)decline the engagement.
• B)express an unqualified opinion on the balance sheet and income statement except for inventory.
• C)issue a disclaimer of opinion.
• D)issue an adverse opinion.

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Definitions:

Unit Sales

The quantity of items sold or number of services rendered over a given period.

Market Share Objective

A strategic business goal aimed at controlling a certain percentage of the market within a specific time.

Industry Sales

The total volume of products sold or services provided within a specific industry over a given period of time.

Production Costs

The expenses associated with producing goods or services, including labor, materials, and overhead costs.