When Auditing Merchandise Inventory at Year-End,the Auditor Performs a Purchase

question 16

Multiple Choice

When auditing merchandise inventory at year-end,the auditor performs a purchase cutoff test to obtain evidence that

• A)All goods purchased before year-end are received before the physical inventory count.
• B)No goods held on consignment for customers are included in the inventory balance.
• C)No goods observed during the physical count are pledged or sold.
• D)All goods owned at year-end are included in the inventory balance.

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Definitions:

Stockholders' Equity

The ownership interest of shareholders in the assets of a corporation, after all liabilities have been subtracted.

Accounts Payable

The amounts owed by a business to its suppliers or creditors for goods and services received, representing short-term liabilities.

Accounts Receivable

Funds that are due to a company from its clients for the delivery of goods and services which payment is pending.

Net Assets

The total assets of a company minus its total liabilities; a measure of its financial health and value.