An Auditor Most Likely Would Make Inquiries of Production and Sales

question 37

Multiple Choice

An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management's financial statement assertion of

• A) Valuation.
• B) Rights and obligations.
• C) Existence.
• D) Completeness.

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Definitions:

Carrying Cost

The total cost of holding inventory, including storage, insurance, taxes, depreciation, and opportunity costs.

Economic Order Quantity

A formula used in inventory management to determine the optimal order size that minimizes total costs related to acquiring, holding, and replenishing inventory.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, and insurance premiums.

Inventory Management

Inventory management involves overseeing and controlling the ordering, storing, and use of components that a company will use in the production of the items it will sell as well as the managing of quantities of finished products.