Question 1

The receipt of raw materials is a part of the acquisition and payment cycle.

Accepted Answer

A) True 
 B)False

Question 2

An auditor selects a random sampling of tag numbers and identifies the tag with that number attached to the actual inventory.The purpose of the procedure is to

Accepted Answer

A) obtain proper cutoff information. 
B) uncover the inclusion of nonexistent items as inventory. 
C) determine if the client has adequately priced the inventory item. 
D) verify that the client has not changed the recorded counts after the auditor left the premises. 
A) obtain proper cutoff information. 
B) uncover the inclusion of nonexistent items as inventory. 
C) determine if the client has adequately priced the inventory item. 
D) verify that the client has not changed the recorded counts after the auditor left the premises.

Question 3

Cost accounting systems and controls are the same for all manufacturing companies.

Accepted Answer

A) True 
 B)False

Question 4

There must be a periodic physical count by the client of the inventory items on hand

Accepted Answer

A) only if the client uses the LIFO method. 
B) only if the client uses a lower-of-cost-or-market method. 
C) regardless of the client's inventory valuation method. 
D) only if the client uses either the LIFO or FIFO method. 
A) only if the client uses the LIFO method. 
B) only if the client uses a lower-of-cost-or-market method. 
C) regardless of the client's inventory valuation method. 
D) only if the client uses either the LIFO or FIFO method.

Question 5

A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of the

Accepted Answer

A) direct labor costs. 
B) raw material costs. 
C) manufacturing overhead costs. 
D) period costs. 
A) direct labor costs. 
B) raw material costs. 
C) manufacturing overhead costs. 
D) period costs.

Question 6

The audit procedure "Perform tests of lower-of-cost-or-market,selling price,and obsolescence" provides assurance mainly for the realizable value objective for inventory pricing and compilation.

Accepted Answer

A) True 
 B)False

Question 7

In some inventory systems,raw materials can be requisitioned by automated computer software when raw materials reach a predetermined level.

Accepted Answer

A) True 
 B)False

Question 8

Auditors need to understand the client's physical inventory count controls before the count of the inventory begins so that

Accepted Answer

A) the auditors can accurately count and tag the inventory for the client. 
B) the auditors can make constructive suggestions as to the adequacy of the procedures. 
C) the client will be informed on exactly what items the auditor intends to test count. 
D) the auditor can communicate any weaknesses directly to the audit committee. 
A) the auditors can accurately count and tag the inventory for the client. 
B) the auditors can make constructive suggestions as to the adequacy of the procedures. 
C) the client will be informed on exactly what items the auditor intends to test count. 
D) the auditor can communicate any weaknesses directly to the audit committee.

Question 9

The audit procedure "Foot the inventory listing schedules for raw materials,work-in-process,and finished goods" provides assurance mainly for the accuracy objective for inventory pricing and compilation.

Accepted Answer

A) True 
 B)False

Question 10

Auditor tests of the physical controls over raw materials,work in process,and finished goods are generally limited to

Accepted Answer

A) observation and confirmation. 
B) observation and inquiry. 
C) inquiry and reconciliation. 
D) observation and reconciliation. 
A) observation and confirmation. 
B) observation and inquiry. 
C) inquiry and reconciliation. 
D) observation and reconciliation.

Question 11

A useful starting point for becoming familiar with the client's inventory is for the auditor to

Accepted Answer

A) read the AICPA's Industry Audit Guide. 
B) review accounting theory covering special inventory problems. 
C) read the client's accounting manual. 
D) tour the client's facility. 
A) read the AICPA's Industry Audit Guide. 
B) review accounting theory covering special inventory problems. 
C) read the client's accounting manual. 
D) tour the client's facility.

Question 12

In the audit of inventory,the auditor and client are jointly responsible for making and recording the count of physical inventory;while the auditor is responsible for drawing conclusions about the adequacy of the physical inventory.

Accepted Answer

A) True 
 B)False

Question 13

In pricing raw materials in manufactured products,auditors must consider both the unit cost of the raw materials and the number of units required to manufacture a unit of output.

Accepted Answer

A) True 
 B)False

Question 14

The extent and timing of an auditor's physical examination of inventory is significantly influenced by the adequacy of the client's perpetual inventory records.

Accepted Answer

A) True 
 B)False

Question 15

Cost accounting controls are those related to the physical inventory and the consequent costs from the point at which

Accepted Answer

A) materials are ordered for purchase until the finished product is sold. 
B) the customer's order is received until the finished product is shipped. 
C) raw materials are requisitioned until the finished product is sent to storage. 
D) raw materials are requisitioned until the finished product is completely manufactured. 
A) materials are ordered for purchase until the finished product is sold. 
B) the customer's order is received until the finished product is shipped. 
C) raw materials are requisitioned until the finished product is sent to storage. 
D) raw materials are requisitioned until the finished product is completely manufactured.

Question 16

Accounting standards require disclosure of inventory valuation methods.

Accepted Answer

A) True 
 B)False

Question 17

From which of the following evidence-gathering audit procedures would an auditor obtain most assurance concerning the existence of inventories?

Accepted Answer

A) observation of physical inventory counts 
B) written inventory representations from management 
C) confirmation of inventories in a public warehouse 
D) auditor's recomputation of inventory extensions 
A) observation of physical inventory counts 
B) written inventory representations from management 
C) confirmation of inventories in a public warehouse 
D) auditor's recomputation of inventory extensions

Question 18

Which one of the following procedures would not be appropriate for an auditor in discharging his responsibilities concerning the client's physical inventories?

Accepted Answer

A) confirmation of goods in the hands of public warehouses 
B) supervising the taking of the annual physical inventory 
C) carrying out physical inventory procedures at an interim date 
D) obtaining written representation from the client as to the existence,quality,and dollar amount of the inventory 
A) confirmation of goods in the hands of public warehouses 
B) supervising the taking of the annual physical inventory 
C) carrying out physical inventory procedures at an interim date 
D) obtaining written representation from the client as to the existence,quality,and dollar amount of the inventory

Question 19

Inventory price tests include testing the client's summarization of the inventory counts.

Accepted Answer

A) True 
 B)False

Question 20

Inventory is often a significant part of a company's current assets.Because of its importance,

Accepted Answer

A) auditors are required by auditing standards to observe the client taking a physical inventory count. 
B) price tests must be performed to verify whether the physical counts were correctly summarized. 
C) companies are required to use perpetual inventory systems. 
D) auditors are required by auditing standards to take the physical inventory for the client. 
A) auditors are required by auditing standards to observe the client taking a physical inventory count. 
B) price tests must be performed to verify whether the physical counts were correctly summarized. 
C) companies are required to use perpetual inventory systems. 
D) auditors are required by auditing standards to take the physical inventory for the client.

Exam 21: Audit of the Inventory and Warehousing Cycle

The receipt of raw materials is a part of the acquisition and payment cycle.

An auditor selects a random sampling of tag numbers and identifies the tag with that number attached to the actual inventory.The purpose of the procedure is to

Cost accounting systems and controls are the same for all manufacturing companies.

There must be a periodic physical count by the client of the inventory items on hand

A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of the

The audit procedure "Perform tests of lower-of-cost-or-market,selling price,and obsolescence" provides assurance mainly for the realizable value objective for inventory pricing and compilation.

In some inventory systems,raw materials can be requisitioned by automated computer software when raw materials reach a predetermined level.

Auditors need to understand the client's physical inventory count controls before the count of the inventory begins so that

The audit procedure "Foot the inventory listing schedules for raw materials,work-in-process,and finished goods" provides assurance mainly for the accuracy objective for inventory pricing and compilation.

Auditor tests of the physical controls over raw materials,work in process,and finished goods are generally limited to

A useful starting point for becoming familiar with the client's inventory is for the auditor to

In the audit of inventory,the auditor and client are jointly responsible for making and recording the count of physical inventory;while the auditor is responsible for drawing conclusions about the adequacy of the physical inventory.

In pricing raw materials in manufactured products,auditors must consider both the unit cost of the raw materials and the number of units required to manufacture a unit of output.

The extent and timing of an auditor's physical examination of inventory is significantly influenced by the adequacy of the client's perpetual inventory records.

Cost accounting controls are those related to the physical inventory and the consequent costs from the point at which

Accounting standards require disclosure of inventory valuation methods.

From which of the following evidence-gathering audit procedures would an auditor obtain most assurance concerning the existence of inventories?

Which one of the following procedures would not be appropriate for an auditor in discharging his responsibilities concerning the client's physical inventories?

Inventory price tests include testing the client's summarization of the inventory counts.

Inventory is often a significant part of a company's current assets.Because of its importance,

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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