When Auditing Steel Ltd, a Large Manufacturer of Building Supplies

question 62

Multiple Choice

When auditing Steel Ltd, a large manufacturer of building supplies, 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:

Preferred Shares

A type of stock that provides a fixed dividend before any dividends are paid to common stockholders and typically has no voting rights.

Dividend

A portion of a company's earnings distributed to shareholders, typically in the form of cash or additional stock.

Weighted Average Cost

A method of calculating the combined cost of goods available for sale by weighting the cost of each item by the quantity purchased.