An Auditor May Select a Sample of Items from the Inventory

question 56

Multiple Choice

An auditor may select a sample of items from the inventory records and inspect them for consistency with the category of the records. The purpose of this test of controls is to ensure that:

• A) recorded inventory exists.
• B) inventories are physically protected from theft or damage.
• C) policies for assessing inventory valuation are appropriate.
• D) proper procedures are followed for the process of the physical count.

---

Definitions:

Accounting Break-even

The point at which total costs and total revenues are equal, leading to neither profit nor loss.

Variable Costs

Costs that vary directly with the level of output or production, such as materials and labor.

Fixed Costs

Expenses that do not change with the level of goods or services produced over a short period, such as rent or salaries.

Financial Break-even

The point at which a company's total revenues are exactly equal to its total expenses, resulting in neither profit nor loss.