Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Sandra's auditing class is discussing inherent risk related to manufacturing entities inventory accounts. Sandra explains to her class that inherent risk is often higher for
Sandra's auditing class is discussing inherent risk related to manufacturing entities inventory accounts. Sandra explains to her class that inherent risk is often higher for manufacturing entities and asks the class why they think this might be? Which of the following responses would be most appropriate from the class? Inherent risk is probably higher for manufacturing entities because they are having to process raw materials into finished goods. This is more complex than just selling premade inventory, so inherent risk would be higher. Inherent risk is likely to be higher for manufacturing entities because their inventory turnover cycles are much slower than in other industries. As a result, they run a much greater risk of obsolescence. Inherent risk is probably higher for manufacturing entities because of the judgment and subjectivity involved with the allocation of costs for items such as indirect materials. None of these answer choices are correct
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started