To Best Ascertain That a Company Has Properly Included Merchandise

question 35

Multiple Choice

To best ascertain that a company has properly included merchandise that it owns in its ending inventory,the auditors should review and test the:

• A)Terms of the open purchase orders.
• B)Purchase cutoff procedures.
• C)Contractual commitments made by the purchasing department.
• D)Purchase invoices received on or around year-end.

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Definitions:

Proceeds From Sales

The total amount of money received by a company from selling goods, services, or assets.

Opportunity Costs

The cost of foregoing the next best alternative when making a decision. It represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Fixed Costs

Expenses that do not change with the level of goods or services produced over the short term.

Variable Costs

Costs that vary directly with the level of production or business activity, such as raw materials, packaging, and labor directly involved in a company's manufacturing process.