Which one of the following must the auditor best understand relative to the supply chain when auditing a manufacturing company?
A)Contract terms,the method of recording and title transfer.
B)Efficiency of operations,purchasing agent compensation and disbursement.
C)Productivity of equipment,cost of capital,and maintenance schedules
D)Quality of scrap,point of sale and carrying costs.

Question

Quizplus · Accepted Answer

Understanding contract terms, the method of recording transactions, and title transfer is important for ensuring that revenue and cost of goods sold are accurately recorded. The supply chain includes the process from purchasing raw materials to delivering finished products to customers. Therefore, the auditor must have a good understanding of these areas to ensure the accuracy of the financial statements. The other options (B, C, and D) are important aspects of a manufacturing company's operations, but they are not directly related to the financial statements and the audit thereof.

Which One of the Following Must the Auditor Best Understand