With Respect to a Small Company's System of Purchasing Supplies

question 116

Multiple Choice

With respect to a small company's system of purchasing supplies, an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been

• A) requested by and approved by the same individual.
• B) used in the course of business and solely for business purposes during the year under audit.
• C) received, counted, and checked to quantities and amounts on purchase orders and invoices.
• D) properly recorded as assets and systematically amortized over the estimated useful life of the supplies.

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Definitions:

Research and Development

The investigative activities a business conducts to improve existing products and procedures or to lead to the development of new products and procedures.

Liquidity

The straightforward process of converting an asset to cash without any effect on its market price.

Forecasting Error

The difference between actual outcomes and previously predicted values, important in assessing the accuracy of projections.