When Perpetual Inventory Records Are Maintained, and Control Risk for Inventory

question 38

Multiple Choice

When perpetual inventory records are maintained, and control risk for inventory is high, the auditor would probably:

• A)insist that the client perform physical counts of inventory items several times during the year.
• B)want the client to schedule the physical inventory count at the end of the year.
• C)increase tests of controls around sales and purchases.
• D)increase the extent of tests for unrecorded liabilities at the end of the year.

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Definitions:

Trichromatic Theory

A theory of color vision that proposes the human eye has three types of receptors, each sensitive to red, green, or blue light, which when combined can produce the perception of any color.

Colour Vision

The ability of the visual system to distinguish objects based on the wavelengths of the light they reflect, emit, or transmit.

Retina

The light-sensitive layer of tissue at the back of the inner eye that converts light into electrical signals sent to the brain.

Absorbs Light

The process by which a material takes in light energy without reflecting it, often converting it into heat.