Physical controls over inventories are important in a manufacturing environment because they enhance management's ability to:
A) produce credible financial reports.
B) prevent "in-house" losses such as theft and damage of inventory.
C) detect inefficient or ineffective manufacturing operations.
D) correct errors resulting from the physical inventory count.

Question

Quizplus · Accepted Answer

Physical controls such as locks, surveillance, and regular inventory counts can prevent losses due to theft or damage to inventory, thereby increasing the accuracy of inventory records and financial reports. While physical controls may also reveal inefficiencies or errors, their primary purpose is to protect inventory.

Physical Controls Over Inventories Are Important in a Manufacturing Environment