Cravens Was Asked to Perform the First Audit of a Wholesale

question 44

Multiple Choice

Cravens was asked to perform the first audit of a wholesale business that does not maintain perpetual inventory records. Cravens has observed the current inventory but has not observed the physical inventory at the previous year-end date and concludes that the opening inventory balance, which is not auditable, is a material factor in the determination of cost of goods sold for the current year. Cravens will probably

• A) Decline the engagement.
• B) Express an unqualified/unmodified opinion on the balance sheet and income statement except for inventory.
• C) Issue a disclaimer of opinion.
• D) Issue an adverse opinion.

Identify the differences between the income statements of manufacturers and merchandisers.

Describe the types of inventories held by manufacturers and their purposes.

Explain the differences between financial and managerial accounting and the goals of internal control systems.

Understanding the principles and structure of a 360-degree feedback appraisal.

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Definitions:

Preventive Maintenance

Maintenance activities carried out regularly on equipment to prevent unexpected failures.

Performance Capabilities

The ability of a company or product to function effectively, often measured against predetermined standards or competitor offerings.

Value-Based Pricing

A pricing strategy where prices are set primarily based on the perceived value to the customer rather than based on the cost of the product or historical prices.

Desired Return

Desired return refers to the expected financial gain or profit an investor aims to achieve from an investment over a specific period.