An Auditor Would Be Most Likely to Learn of Slow-Moving

question 71

Multiple Choice

An auditor would be most likely to learn of slow-moving inventory through:

• A)review of the cash payments journal.
• B)enquiry of sales personnel.
• C)review of perpetual inventory records.
• D)physical observation of inventory.

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Definitions:

Indirect Method

A technique used in cash flow statement preparation that adjusts net income for changes in non-cash working capital and non-operating items to determine cash flow from operating activities.

Operating Activities

Tasks and transactions related to the core business functions of a company, such as selling products and providing services, integral to generating revenue.

Direct Method

A costing method that directly allocates service department costs to producing departments without any intermediate allocation steps.

Operating Activities

Refers to the primary revenue-generating activities of a business, typically including sales, service delivery, and associated costs.