Auditing the Valuation Assertion for Inventory of a Client Utilizing

question 20

Multiple Choice

Auditing the valuation assertion for inventory of a client utilizing the FIFO cost flow assumption will require the auditor to examine

• A)invoices representing the more recent purchases of inventory.
• B)invoices representing the purchase of base year inventory in the year of inception.
• C)shipping documents for a sample of cost of goods sold transactions during the year.
• D)shipping documents for a sample of units on hand in the interim period.

---

Definitions:

Ordinary Repairs

Routine maintenance expenditures necessary to keep an asset in operating condition without significantly enhancing its life or value.

Useful Life

The estimated period that an asset is expected to be useful in the operations of a business.

Operating Condition

Conditions or aspects related to the daily functionality and management of a business's core activities.

Capital Expenditure

Funds used by a company to acquire or upgrade physical assets such as property, plant, or equipment to improve its long-term operations.