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.

---

Definitions:

Periodic Inventory System

An inventory accounting system where the inventory count is physically conducted at specific periods, leading to adjustments in the accounts at each period end.

Inventory Cost

The total cost associated with acquiring, storing, and preparing goods for sale, including purchase price, storage, and handling costs.

Direct Method

A way of preparing the cash flow statement where actual cash flows from operating activities are listed directly.

Periodic Inventory System

An accounting method where inventory is physically counted and valued at specific intervals, typically at the end of an accounting period.