Inventory Is a Complex Area to Audit for All but Which

question 65

Multiple Choice

Inventory is a complex area to audit for all but which of the following reasons?

• A) Inventory is often in different locations.
• B) There are several acceptable valuation methods and some entities use different methods for different types of inventory.
• C) Inventory is often the largest account in working capital.
• D) Inventory valuation includes few estimates.

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Definitions:

FOB Destination

A shipping term where the seller bears the shipping costs and retains ownership of the goods until they are delivered and accepted by the purchaser.

Consignment Stock

Inventory that is in the possession of the customer but still legally owned by the supplier until sold.

Stock Discrepancies

Differences between the amount of inventory recorded and the actual inventory present, often resulting from errors or theft.

Periodic Inventories

An inventory system where the inventory count is conducted at specific intervals to determine the cost of goods sold and ending inventory levels.