The Auditor Should Plan the Audit of the Inventory Business

question 11

Multiple Choice

The auditor should plan the audit of the inventory business process with the following presumption:

• A)there is a risk of material misstatement due to fraud relating to inventory transactions.
• B)professional skepticism is necessary to find misstatements.
• C)planning the audit requires a questioning mind.
• D)the general environment or tone in the company may allow management to rationalize committing fraud.

---

Definitions:

Depreciation Expense

Assigning the price of a tangible asset across its operational life.

Produced Units

Refers to the number of units of a product that have been completed and are ready for sale during a specific period.

Extraordinary Repairs

Significant and infrequent repairs that extend the useful life of an asset beyond its original estimate.

Useful Life

Useful Life is the estimated period over which an asset is expected to be economically usable by an entity, with a finite period for depreciation or amortization.