With Respect to a Small Company's System of Purchasing Supplies

question 13

Multiple Choice

With respect to a small company's system of purchasing supplies, an auditor's primary concern should be to obtain satisfaction that supplies ordered and paid for have been:

• A)requested and approved by authorized individuals who have no incompatible duties.
• B)received, counted, and checked to quantities and amounts on purchase orders and invoices.
• C)properly recorded as assets and systematically amortized over the estimated useful life of the supplies.
• D)used in the course of business and solely for business purposes during the year under audit.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds over a particular period of time, typically expressed as a rate of the principal.

Statement of Cash Flows

A financial document that provides a detailed analysis of a company's cash inflow and outflow over a certain period, showing how the company's cash position changes.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year or within the business's operating cycle, whichever is longer.

Net Working Capital

The gap between a firm's current assets and its current liabilities, showcasing its operational effectiveness and short-term financial stability.