An Auditor Selected a Product Recorded in the Finished Goods

question 45

Multiple Choice

An auditor selected a product recorded in the finished goods perpetual inventory subsidiary account. The auditor went to the warehouse and counted the product and compared this amount with the amount in the finished goods perpetual inventory subsidiary account. Which ASB balance assertion is the auditor most likely testing?

• A)Existence
• B)Completeness
• C)Rights and obligations
• D)Valuation

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Definitions:

Earnings Rate

The return on an investment or the amount of profit made compared to the amount of money invested.

Internal Rate of Return

An investment’s projected rate of return, calculated by finding the discount rate that sets the net present value of all cash flows (both positive and negative) to zero.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows, given a specified rate of return, adjusting for the time value of money.

Annuity

An annuity is a financial product that pays out a fixed stream of payments to an individual, typically used as an income stream for retirees.