The AICPA's Practice Alert No

question 9

Multiple Choice

The AICPA's Practice Alert No.94-2: Auditing Inventories-Physical Observations describes several circumstances that constitute inventory fraud.Which of the following is not an example of inventory fraud?

• A)including items in inventory when the corresponding payable has not been recorded
• B)adjusting inventory to lower-of-cost-or-market
• C)increasing counts for items that auditors did not test count
• D)counting obsolete inventory as salable or usable

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Definitions:

Weighted Average Cost

An accounting method to determine the average cost of goods sold or produced, taking into account the varying costs over time.

Tax Rate

The percentage at which an individual or corporation is taxed, varying based on income level, type of good, or service, among other factors.

Leverage

The use of various financial instruments or borrowed capital, such as debt, to increase the potential return of an investment.

Stock Price

The cost of purchasing a single share of a company, which fluctuates based on market conditions and investor perceptions.