The Audit Procedure "Observe the Client Taking a Physical Inventory

question 59

Multiple Choice

The audit procedure "observe the client taking a physical inventory count and test the count" is sufficient to determine all of the following except:

• A) whether recorded inventory actually exists.
• B) whether recorded inventory was properly valued by the client.
• C) whether recorded inventory was properly counted by the client.
• D) whether client inventory instruction had properly been followed.

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Definitions:

Credible Threat

A statement or action that is believable and carries the weight of possible enforcement, often used in negotiations or strategic situations.

Economies of Scale

The cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale.

Diseconomies of Scale

The phenomenon where a firm's per unit costs increase as it increases production, typically due to inefficiencies.

Learning-By-Doing

Acquiring skills and efficiency in a task through direct experience or practice, often leading to reduced costs and improved performance over time.