An Auditor's Tests of Controls Over the Issuance of Raw

question 67

Multiple Choice

An auditor's tests of controls over the issuance of raw materials to production would most likely include

• A)Reconciling raw materials and work-in-process perpetual inventory records to general ledger balances.
• B)Inquiring of the custodian about the procedures followed when defective materials are received from vendors.
• C)Observing that raw materials are stored in secure areas and that storeroom security is supervised by a responsible individual.
• D)Examining material requisitions and reperforming client controls designed to process and record issuances.

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Definitions:

Marginal Propensity

The tendency of a person to spend an additional unit of currency; often relates to income in the context of marginal propensity to consume or save.

Simple Multiplier

The ratio used to estimate the proportional amount of increase, or decrease, in final income that results from an injection, or withdrawal, of spending.

Marginal Propensity

The rate at which an individual, household, or economy is likely to consume (or save) with respect to an incremental increase in income.

Multiplier

An economic factor that quantifies the impact of increased spending in the economy, leading to a proportional increase in income and consumption.