While observing a client's annual physical inventory, an auditor recorded test counts for several items and noticed that certain test counts were higher than the recorded quantities in the client's perpetual records. This situation could be the result of the client's failure to record
A)purchase discounts.
B)purchase returns.
C)sales.
D)sales returns.

Question

Quizplus · Accepted Answer

If the test counts were higher than the recorded quantities in the client's perpetual records, it could be due to the client's failure to record sales returns. This means that items that were returned by customers were not properly recorded in the client's system, leading to an overstatement of inventory.

While Observing a Client's Annual Physical Inventory, an Auditor Recorded