The Inventory of MegaMart Company Is Distributed Between 85 Stores

question 33

Multiple Choice

The inventory of MegaMart Company is distributed between 85 stores throughout the United States,Puerto Rico and Mexico.MegaMart has a calendar year-end,uses a periodic inventory system and performs a physical count on January 1st of each year.In the planning of the audit of MegaMart,the engagement team must consider

• A)if the finance departments in Mexico and Puerto Rico are available to perform the audit testing on January 1st.
• B)which of the stores to randomly visit and how many items to test.
• C)the risk of the company transporting items from Maine to Mexico between audit counts.
• D)coordinating with the client which stores will be visited for inventory observation.

---

Definitions:

Reduced Comparability

A situation where differences in accounting policies or external factors make it difficult to directly compare financial statements across periods or entities.

Financial Statements

Documents that present an entity's financial activities and condition to users, including balance sheet, income statement, and statement of cash flows.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations by comparing its current assets to its current liabilities.

Disclosure Requirements

Regulations or standards mandating companies to reveal certain financial and non-financial information to maintain transparency and inform stakeholders.