The overall objective in the audit of the inventory and distribution cycle is to determine that
A)costs of goods sold and gross profit are correctly stated on the income statement.
B)inventory items on the balance sheet are neither fraudulent nor materially in error.
C)gross profit and inventory are fairly presented on the financial statements.
D)inventory and cost of goods sold are fairly stated on the financial statements.

Question

Quizplus · Accepted Answer

The objective of the audit of the inventory and distribution cycle is to ensure that inventory and cost of goods sold are fairly presented on the financial statements, which is achieved by verifying the accuracy of inventory quantities and values, testing the effectiveness of internal controls over inventory, and ensuring that appropriate accounting methods are used for cost of goods sold. Option A refers only to the income statement, and option C is too broad and encompasses all financial statements, not just inventory and cost of goods sold. Option B focuses only on the balance sheet and does not address the accuracy of cost of goods sold.

The Overall Objective in the Audit of the Inventory and Distribution