Which of the Following Is True Regarding an Auditor's Assessment

question 50

Multiple Choice

Which of the following is true regarding an auditor's assessment of management estimates for calculations related to inventory valuation in the land development and home building industry?

• A) Greater uncertainty exists regarding estimates of future cash flows when development and construction are still in the early stages.
• B) Since prospective buyers can cancel the contracts, management estimates expected cancellations using current engineering specifications.
• C) If an auditor assessed the company's process and underlying assumptions in a prior period, the assessment does not need to be updated for subsequent audits unless there is a change in the underlying assumptions.
• D) Auditors typically engage a specialist to perform detailed calculations of discounted cash flows expected from inventory.

---

Definitions:

Prenatally

Referring to the period before birth, during the development of the fetus within the mother's womb.

Mouth

The opening in the face of humans and many animals, used for eating, breathing, and speaking, encased by the lips and leading to the throat and digestive tract.

Innate Preference

A natural or instinctual liking or inclination towards something without the need for learning or experience.

Sweet

A taste sensation that is pleasant and often associated with sugary substances.