The AICPA's Practice Alert No

question 40

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:

Streetlights

Artificial outdoor lighting devices installed on poles, used to illuminate streets and public areas during the night for safety and convenience.

Marginal Benefit

The increment in pleasure or usefulness experienced from consuming or creating an additional unit of a good or service.

Streetlights

Streetlights are outdoor lighting fixtures placed along streets, designed to enhance visibility and safety during nighttime.

Market Failure

A situation in which the allocation of goods and services by a market is not efficient, often leading to a net social welfare loss.