Periodic or Cycle Counts of Selected Inventory Items Are Made

question 60

Multiple Choice

Periodic or cycle counts of selected inventory items are made at various times during the year rather than during a single inventory count at year-end. Which of the following is necessary if the auditor plans to observe inventories at interim dates?

• A)Complete recounts by independent teams are performed.
• B)Perpetual inventory records are maintained.
• C)Unit cost records are integrated with production accounting records.
• D)Inventory balances are rarely at low levels.

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Definitions:

Natural Monopolies

Market conditions where a single firm can supply a good or service more efficiently than any competitor due to economies of scale, hence dominating the market.

Positive Feedback

Put simply, success breeds success, failure breeds failure; the effect is seen with goods that are subject to network externalities.

Marginal Social Benefits

The additional benefits to society as a whole from producing one more unit of a good or service.

Socially Optimal Level

The level of output or activity where the benefits to society are maximized, taking into account both private and external costs and benefits.