When There Are No Perpetual Inventory Files and Inventory Is

question 53

Multiple Choice

When there are no perpetual inventory files and inventory is material:

• A)an audit cannot be performed, so the auditor must issue a disclaimer.
• B)a physical inventory should be taken by the client near year-end.
• C)the auditor will have to perform the inventory count and determine valuation.
• D)the auditor need not observe inventory counts but must do test counts.

Calculate the margin of safety in dollars and percentage.

Apply changes in the business environment (e.g., sales incentives, price changes, advertising budget adjustments) to predict their effect on net operating income.

Estimate sales required to achieve a target profit.

Understand the concept of contribution margin ratio and its application in determining target profit sales.

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Definitions:

Protectionism

A policy of imposing restrictions on imports, often through tariffs and quotas, to shield domestic industries from foreign competition.

Frederic Bastiat

A French economist and writer known for his advocacy of free-market policies and his critique of protectionism in the 19th century.

European Union

A political and economic union of 27 European countries that are located primarily in Europe.

World Exports

This term relates to the total sum of goods and services that are sold and shipped by one country to others across the globe.