If There Is a Risk That Management's Assertion That Recorded

question 53

Multiple Choice

If there is a risk that management's assertion that recorded inventory exists is not valid, the auditor will

• A) spend more time testing for the existence of recorded inventory.
• B) spend less time testing for the existence of recorded inventory.
• C) spend more time testing for the completeness of inventory.
• D) not adjust their audit strategy.

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Definitions:

Principal Location

The main office or site where the central operations of a business are conducted or the primary place of business.

Accounts Receivable

Funds that customers owe to a company for products or services that have been provided but not yet compensated for.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may not be collectible.

Mutual Agency

A principle in partnership where each partner is both an agent and a principal to the partnership, authorized to bind the partnership in contracts and agreements.