Shelfco,Inc

question 23

Multiple Choice

Shelfco,Inc.has an inventory report that is approximately 4,000 pages.The audit program requires James Morris,the staff auditor,to test the report for accuracy.What is the most efficient and effective means for James to perform the procedure?

• A)Ask the client to foot and extend the report and return the results of the test to the auditor for concluding.
• B)Foot and extend every 100th page and extrapolate the results of footing to the total of the report.
• C)Obtain an electronic copy of the file and use generalized audit software in footing and extending.
• D)Skip the procedure as the cost of footing and extending exceeds the benefit derived from the audit test.

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Definitions:

Investment

The distribution of assets like money or time with the hope of earning revenue or gains.

Cost Method

An accounting approach used to measure the value of an investment, based on the cost to acquire it, minus any impairments.

Unamortized Acquisitional Fair Value Adjustments

The portion of the adjustments to the fair values of acquired assets and liabilities through an acquisition that has yet to be amortized over their useful life.

Unrealized Profit

Profit that has been generated on paper from investments but not yet realized through a sale or transaction.