Which of the Following Is a Condition Which Would Not

question 9

Multiple Choice

Which of the following is a condition which would not create a conducive situation for a client to take a physical inventory at an interim date before year-end?

• A)The control risk over inventory is high.
• B)The auditor will be able to review material transactions in the roll-forward period.
• C)The auditor can effectively test the year-end balance through a combination of analytical procedures and selective testing of transactions between the physical count and the year-end.
• D)The auditor reviews the intervening transactions for evidence of any manipulation or unusual activity.

---

Definitions:

Discounted Cash Flow

A financial analysis technique that estimates the value of an investment based on its expected future cash flows, discounted back to their present value.

Future Cash Flows

Estimated monetary gains or expenditures that a company expects to receive or pay out in the future.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal installments.

Mutually Exclusive

A statistical term describing two or more events that cannot occur simultaneously.