If a Client Uses the Cycle Method of Counting Inventory

question 6

Essay

If a client uses the cycle method of counting inventory and never takes "wall to wall" inventory on a single date, what must the auditor do in order to avoid requesting the client to take a full inventory count?

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Definitions:

Additional Revenues

Extra income generated from sources outside of the company's main business operations.

Sunk Cost

Costs that have already been incurred and cannot be recovered or reversed.

Incremental Overhead Costs

Additional overhead expenses directly resulting from a specific business decision or activity.

Relevant Costs

Costs that should be considered when making decisions because they will be affected by the decision.