Question 1

When labor is a significant part of inventory, verifying the proper accounting of these costs should be tested in the:

Accepted Answer

A) inventory and warehousing cycle. 
B) payroll and personnel cycle. 
C) acquisitions and payments cycle. 
D) cash cycle. 
A) inventory and warehousing cycle. 
B) payroll and personnel cycle. 
C) acquisitions and payments cycle. 
D) cash cycle.

Question 2

One of the auditor's primary concerns in verifying the transfer of inventory from one location to another is that:

Accepted Answer

A) recorded transfers exist. 
B) all actual transfers are recorded. 
C) the quantity, date, and description of all recorded transfers are accurate. 
D) all of the above. 
A) recorded transfers exist. 
B) all actual transfers are recorded. 
C) the quantity, date, and description of all recorded transfers are accurate. 
D) all of the above.

Question 3

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 4

Discuss the four aspects of the audit of cost accounting with which the auditor is most concerned.

Accepted Answer

The auditor is most concerned with:
•Phy

Question 5

Explain why the audit of work in process and finished goods inventory is generally more complex than the audit of purchased inventory.

Accepted Answer

The need to verify the cost of raw mater

Question 6

The test of details of balance procedure which requires the auditor to perform tests of lower of cost or market, selling price, and obsolescence is an attempt to satisfy the objective of:

Accepted Answer

A) existence. 
B) completeness. 
C) accuracy. 
D) realizable value. 
A) existence. 
B) completeness. 
C) accuracy. 
D) realizable value.

Question 7

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 8

A common source of business risk for inventory is the reliance on a few key suppliers.

Accepted Answer

A) True 
 B)False

Question 9

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 10

Master files, spreadsheets, and reports that accumulate material, labor, and overhead as the costs are incurred are:

Accepted Answer

A) accounting systems. 
B) storeroom documents. 
C) cost accounting records. 
D) finished goods inventory records. 
A) accounting systems. 
B) storeroom documents. 
C) cost accounting records. 
D) finished goods inventory records.

Question 11

The audit of the inventory and warehousing cycle will be affected by the results from other business processes.Identify the "other" business cycles and how they impact the audit of inventory.

Accepted Answer

Acquisition and Payment: Acqui

Question 12

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 13

The test of details of balance procedure which requires the auditor to account for unused inventory tag numbers to make sure none have been deleted is associated with the audit objective of:

Accepted Answer

A) accuracy. 
B) existence. 
C) detail tie-in. 
D) completeness. 
A) accuracy. 
B) existence. 
C) detail tie-in. 
D) completeness.

Question 14

In addition to performing analytical procedures that examine the relationship of inventory account balances with related financial statement accounts, auditor's will often use non-financial measures in determining the reasonableness of inventory balances.List below at least two non-financial measures that may be useful to auditors.

Accepted Answer

Size and weight of i

Question 15

Which of the following statements is correct regarding the audit of inventory cost accounting?

Accepted Answer

A) Cost accounting systems and controls are the same for all manufacturing companies. 
B) All companies that have work-in-process must use a perpetual inventory system. 
C) Auditors test perpetual inventory master files by examining documentation that supports additions and reductions of inventory amounts in the master files. 
D) Manufacturing companies keep their cost accounting records separate from the production and other accounting records. 
A) Cost accounting systems and controls are the same for all manufacturing companies. 
B) All companies that have work-in-process must use a perpetual inventory system. 
C) Auditors test perpetual inventory master files by examining documentation that supports additions and reductions of inventory amounts in the master files. 
D) Manufacturing companies keep their cost accounting records separate from the production and other accounting records.

Question 16

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

Accepted Answer

Inventory turnover for 2010 is 12, and f

Exam 21: Audit of the Inventory and Warehousing Cycle

When labor is a significant part of inventory, verifying the proper accounting of these costs should be tested in the:

One of the auditor's primary concerns in verifying the transfer of inventory from one location to another is that:

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

Discuss the four aspects of the audit of cost accounting with which the auditor is most concerned.

Explain why the audit of work in process and finished goods inventory is generally more complex than the audit of purchased inventory.

The test of details of balance procedure which requires the auditor to perform tests of lower of cost or market, selling price, and obsolescence is an attempt to satisfy the objective of:

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

A common source of business risk for inventory is the reliance on a few key suppliers.

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.

Master files, spreadsheets, and reports that accumulate material, labor, and overhead as the costs are incurred are:

The audit of the inventory and warehousing cycle will be affected by the results from other business processes.Identify the "other" business cycles and how they impact the audit of inventory.

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

The test of details of balance procedure which requires the auditor to account for unused inventory tag numbers to make sure none have been deleted is associated with the audit objective of:

Which of the following statements is correct regarding the audit of inventory cost accounting?

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

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

Internal Control, Control Risk, and Section 404 Audits

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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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