Question 1

The auditor's tour of the client's inventory facilities should be led by

Accepted Answer

A) a member of the audit committee. 
B) the CFO. 
C) a plant supervisor. 
D) the company president. 
A) a member of the audit committee. 
B) the CFO. 
C) a plant supervisor. 
D) the company president.

Question 2

Given the following information about your audit client,perform analytical procedures and comment on your findings.

Accepted Answer

Inventory turnover for 2015 is 12,and fo

Question 3

Inventory compilation tests are used to verify that the inventory is recorded at the lower of cost or market.

Accepted Answer

A) True 
 B)False

Question 4

McKesson & Robbins Company is a well-known audit case involving auditor responsibility.What occurred at the McKesson & Robbins Company to change the way in which auditors audit inventory?

Accepted Answer

A) The company recorded nonexistent inventory. 
B) The auditor did not perform any audit tests of the inventory. 
C) The auditor and company colluded to overstate inventory balances. 
D) The company counted inventory three months prior to year-end. 
A) The company recorded nonexistent inventory. 
B) The auditor did not perform any audit tests of the inventory. 
C) The auditor and company colluded to overstate inventory balances. 
D) The company counted inventory three months prior to year-end.

Question 5

Discuss the auditor's responsibilities for inventory maintained in public warehouses or with other outside custodians.

Accepted Answer

An auditor's physical examination of inv

Question 6

When a client has standard cost records,an efficient and useful method of determining valuation is to review and analyze variances.

Accepted Answer

A) True 
 B)False

Question 7

The design of tests of details of balances for inventory is affected by audit results from multiple cycles.Identify the cycles,other than the inventory and warehousing cycle that affect the audit of inventory.

Accepted Answer

Tests of details of balances for invento

Question 8

When may auditors observe the physical inventory count?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 9

Handling the receipt of ordered goods is a part of the ________ cycle.

Accepted Answer

A) purchasing 
B) acquisition and payment 
C) inventory 
D) inventory and warehousing 
A) purchasing 
B) acquisition and payment 
C) inventory 
D) inventory and warehousing

Question 10

In valuing inventory,the auditor must consider all but which of the following factors?

Accepted Answer

A) The valuation method must be in accordance with GAAP. 
B) The valuation method must be applied on a consistent basis. 
C) The inventory must be valued at the lower of cost or market. 
D) LIFO must be used for work-in-process inventory. 
A) The valuation method must be in accordance with GAAP. 
B) The valuation method must be applied on a consistent basis. 
C) The inventory must be valued at the lower of cost or market. 
D) LIFO must be used for work-in-process inventory.

Question 11

Separate perpetual records are likely to be kept only for raw materials inventory.

Accepted Answer

A) True 
 B)False

Question 12

The audit of cost accounting begins with the internal transfer of assets from raw materials to work-in-process to

Accepted Answer

A) manufacturing overhead. 
B) finished goods inventory. 
C) the perpetual inventory master files. 
D) retail sales. 
A) manufacturing overhead. 
B) finished goods inventory. 
C) the perpetual inventory master files. 
D) retail sales.

Question 13

In job cost systems,costs are accumulated by individual jobs.

Accepted Answer

A) True 
 B)False

Question 14

It is frequently possible to test the physical inventory prior to the balance sheet date when

Accepted Answer

A) the perpetual inventory records are accurate and related controls operate effectively. 
B) year-end sales are small. 
C) the internal control system is no better at year-end than at an earlier point in time. 
D) the client counts inventory at interim dates. 
A) the perpetual inventory records are accurate and related controls operate effectively. 
B) year-end sales are small. 
C) the internal control system is no better at year-end than at an earlier point in time. 
D) the client counts inventory at interim dates.

Question 15

You are gathering evidence for the audit objective that existing inventory items are included in the inventory listing schedule.The audit procedure that would provide you with the best evidence to confirm this objective is

Accepted Answer

A) trace from inventory tags to the inventory listing schedule and make sure the inventory on the tags is included. 
B) trace the inventory totals to the general ledger. 
C) perform tests of lower-of-cost-or-market. 
D) account for unused tags shown in the auditor's documentation to make sure no tags have been added. 
A) trace from inventory tags to the inventory listing schedule and make sure the inventory on the tags is included. 
B) trace the inventory totals to the general ledger. 
C) perform tests of lower-of-cost-or-market. 
D) account for unused tags shown in the auditor's documentation to make sure no tags have been added.

Question 16

When verifying the transfer of inventory from one location to another,the audit objectives with which the auditor is primarily concerned are occurrence of recorded transfers,completeness of recorded transfers,and accuracy of recorded transfers.

Accepted Answer

A) True 
 B)False

Question 17

When auditors observe the client counting inventory,they should be careful to do all of the following except

Accepted Answer

A) inquire about items that are likely to be obsolete or damaged. 
B) calculate the unit cost of the inventory items. 
C) discuss with management the reasons for excluding any material items. 
D) observe the counting of the most significant items. 
A) inquire about items that are likely to be obsolete or damaged. 
B) calculate the unit cost of the inventory items. 
C) discuss with management the reasons for excluding any material items. 
D) observe the counting of the most significant items.

Question 18

When auditing manufacturing overhead costs assigned to inventory,auditors should keep in mind that

Accepted Answer

A) GAAP has strict procedures that must be followed when assigning overhead to work-in-process inventory. 
B) overhead costs must be allocated to raw materials,work-in-process,and finished goods inventory. 
C) management typically allocates overhead using total direct labor dollars as the basis for the allocation. 
D) determining the reasonableness of the allocation method is relatively simple for work-in-process inventory. 
A) GAAP has strict procedures that must be followed when assigning overhead to work-in-process inventory. 
B) overhead costs must be allocated to raw materials,work-in-process,and finished goods inventory. 
C) management typically allocates overhead using total direct labor dollars as the basis for the allocation. 
D) determining the reasonableness of the allocation method is relatively simple for work-in-process inventory.

Question 19

In order to strengthen controls over cost accounting information,a company should consider implementing

Accepted Answer

A) perpetual inventory master files. 
B) a job order cost accounting system. 
C) an accounting system that keeps separate the records of the accounting department from the records of the production department. 
D) an economic quantity order system. 
A) perpetual inventory master files. 
B) a job order cost accounting system. 
C) an accounting system that keeps separate the records of the accounting department from the records of the production department. 
D) an economic quantity order system.

Question 20

When a physical count of inventory is performed at an interim date,the auditor observes it at that time and tests the perpetual records for transactions

Accepted Answer

A) throughout the year. 
B) which are a representative sample of the period under audit. 
C) from the date of the count to year-end. 
D) from the date of the count to the end of the audit field work. 
A) throughout the year. 
B) which are a representative sample of the period under audit. 
C) from the date of the count to year-end. 
D) from the date of the count to the end of the audit field work.

Exam 21: Audit of the Inventory and Warehousing Cycle

The auditor's tour of the client's inventory facilities should be led by

Given the following information about your audit client,perform analytical procedures and comment on your findings.

Inventory compilation tests are used to verify that the inventory is recorded at the lower of cost or market.

McKesson & Robbins Company is a well-known audit case involving auditor responsibility.What occurred at the McKesson & Robbins Company to change the way in which auditors audit inventory?

Discuss the auditor's responsibilities for inventory maintained in public warehouses or with other outside custodians.

When a client has standard cost records,an efficient and useful method of determining valuation is to review and analyze variances.

The design of tests of details of balances for inventory is affected by audit results from multiple cycles.Identify the cycles,other than the inventory and warehousing cycle that affect the audit of inventory.

When may auditors observe the physical inventory count?

Handling the receipt of ordered goods is a part of the ________ cycle.

In valuing inventory,the auditor must consider all but which of the following factors?

Separate perpetual records are likely to be kept only for raw materials inventory.

The audit of cost accounting begins with the internal transfer of assets from raw materials to work-in-process to

In job cost systems,costs are accumulated by individual jobs.

It is frequently possible to test the physical inventory prior to the balance sheet date when

You are gathering evidence for the audit objective that existing inventory items are included in the inventory listing schedule.The audit procedure that would provide you with the best evidence to confirm this objective is

When verifying the transfer of inventory from one location to another,the audit objectives with which the auditor is primarily concerned are occurrence of recorded transfers,completeness of recorded transfers,and accuracy of recorded transfers.

When auditors observe the client counting inventory,they should be careful to do all of the following except

When auditing manufacturing overhead costs assigned to inventory,auditors should keep in mind that

In order to strengthen controls over cost accounting information,a company should consider implementing

When a physical count of inventory is performed at an interim date,the auditor observes it at that time and tests the perpetual records for transactions

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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