[rdubs]

Question: Which of the following procedures best addresses the
adequacy of presentation and disclosure for inventory of a
nonissuer?

Answer:
a. Obtaining confirmation of inventories that are pledged
under loan agreements

The other possible answers:
b. Observing the company’s physical inventory-taking
procedures.
c. Tracing the test counts during the physical inventory to the
final inventory listing.
d. Examining the inventory turnover ratio and determining
whether it is in line with similar companies in the industry.

[kwatts]

The question is basically asking what do you need to check that the disclosures are accurate and complete (focusing on the notes). Therefore, any loan agreements are required to be disclosed including what is being used a collateral / pledged.

I hope that helps.

[Author]

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