The answer is (C) Helps point to a set of actions that should occur
A CPA examines a sample of copies of December and January sales invoices for the initials of the person who verified the quantitative data. This is an example of a Test of a control
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What is the Test of a control?</h3>
- Any auditing technique used to assess an organization's internal controls is known as a test of control.
- Determining if these internal controls are adequate to identify or reduce the risk of material misstatements is the goal of control tests in auditing.
- For instance, the auditor is working on the audit of ABC's financial accounts and it will begin very soon.
- Normally, the auditor must complete audit preparation and get audit partner approval before proceeding with the substantive test or conducting fieldwork.
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<u>Explanation:</u>
a. Formerly, these manufacturers have to provide storage space to display their inventory of mattresses, however, online retail sellers have taken up this activity by holding the various sizes of the available inventory, and then simply display them on photos/videos on their website.
b. No. The decision to purchase a car direct from the manufacturer without seeing the product in person or testing the product isn't the most preferred option for many, however, an expensive refrigerator could be purchased without seeing or testing it out. Usually, the following factors are considered:
- Would this product match the description stated?
- Would the cost of return be worth it if there happens to be a problem with the product?
Based on the perpetual system, a buyer can incur cash freight costs if they transport <u>Inventory</u>.
<h3>How are freight costs treated?</h3>
The perpetual system allows for the buyer of inventory to record the freight cost for the merchandise in the inventory account.
This means that the freight cost will be capitalized and added to the cost of the inventory to recover the costs.
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