Auditing Standards Require That Auditors Satisfy Themselves About the Effectiveness

question 113

Essay

Auditing standards require that auditors satisfy themselves about the effectiveness of the client's method's of counting inventory and the reliance they can place on the client's representations about the quantities and physical condition of the inventories. To meet this requirement auditors must perform 4 activities. List below.

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Definitions:

Acquisition

The process of obtaining control of another company or business entity through purchase or merger.

Receivable Turnover

A financial metric that measures how effectively a company is collecting on its receivables, calculated as sales divided by the average accounts receivable.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Acid-test Ratio

A financial metric that assesses a company's ability to quickly liquidate assets to cover short-term liabilities, excluding inventory.