In a Manufacturing Company, Which One of the Following Audit

question 4

Multiple Choice

In a manufacturing company, which one of the following audit procedures would give the least assurance with regards to the valuation and allocation assertion for inventory?

• A) Examining paid vendors' invoices.
• B) Testing the computation of standard overhead rates.
• C) Obtaining confirmation of inventories pledged under loan agreements.
• D) Reviewing direct labour rates.

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Definitions:

Current Liability

An entity's financial liabilities that must be settled with lenders within a twelve-month period.

Revenue Recognition

Revenue Recognition is the accounting principle that dictates the specific conditions under which revenue is recognized or accounted for.

Estimated Costs

Costs that are predicted or forecasted based on current information and experience, used for budgeting and planning purposes.