Which of the Following Audit Procedures Is an Auditor Most

question 43

Multiple Choice

Which of the following audit procedures is an auditor most likely to perform in testing controls related to management's assertion about the completeness of sales?

• A) Verify that extensions and footings on the entity's sales invoices and monthly customer statements have been recomputed.
• B) Inspect the entity's reports of pre-numbered shipping documents that have not been recorded in the sales journal.
• C) Compare the invoiced prices on pre-numbered sales invoices to the entity's authorized price list.
• D) Inquire about the entity.

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Definitions:

EPS

Earnings Per Share, a key indicator of a company's profitability, calculated by dividing the company's net income by its total number of outstanding shares.

DFL

Degree of Financial Leverage, a ratio measuring the sensitivity of a company's earnings per share to fluctuations in its operating income, due to changes in its capital structure.

Optimal Capital Structure

The most favorable blend of debt and equity financing that minimizes a company's cost of capital while maximizing its market value.

Stock Price

The current price at which a share of a company is traded on the stock market.