Section 404 of the Sarbanes-Oxley Act Requires the Auditor to Provide

question 32

Multiple Choice

Section 404 of the Sarbanes-Oxley Act requires the auditor to provide which of the following?

• A) Reasonable assurance on the financial statements, absolute assurance on internal control.
• B) Reasonable assurance on internal control, absolute assurance on the financial statements.
• C) Absolute assurance on both the financial statements and internal control.
• D) Reasonable assurance on both the financial statements and internal control.

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Definitions:

LIFO inventory cost method

An inventory valuation method that assumes the last items acquired are the first to be sold, affecting cost of goods sold and ending inventory.

Cost of merchandise sold

The total cost of acquiring or manufacturing the products that were sold to customers during a period.

Perpetual system

An inventory accounting system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

FIFO

An accounting method used to manage inventory and cost of goods sold where the first items produced or acquired are the first to be sold.