Exam 21: Audit of the Inventory and Warehousing Cycle

Pricing manufactured inventory is difficult. Auditors must evaluate the method of allocating manufacturing overhead for all but which of the following?

If an auditor were concerned with obtaining evidence about the appropriateness of the value of inventory, which of the following tests would be most appropriate?

To test for proper sales cutoff, an auditor would obtain the number of the last bill of lading issued during the period under audit and verify that the item shipped had been excluded from the inventory listing.

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

A comparison of the current year's inventory turnover ratio with previous years' may indicate the presence of obsolete inventory.

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

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.

If a client intends to count inventory at an interim date, the auditor should expect there to be all of the following except

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

When determining the sample size for the number of items the auditor should count during the physical inventory,

Auditors test the quantity of materials charged to work-in-process by tracing these quantities to

________ accumulate costs by individual jobs as material is issued into production and labor costs are incurred.

The inventory and warehousing cycle can be thought of as having two separate but closely related systems, one involving the actual physical flow of goods, and the other the

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

Physical examination is an essential type of evidence used to verify the existence and count of inventory.

Auditor tests of physical controls over raw materials, work-in-process, and finished goods are performed by

If the auditor concludes that physical controls over inventory are so inadequate that the inventory will be difficult to count, the auditor should ordinarily

When auditing inventory cost accounting, the auditor is concerned with all of the following except for

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

The physical observation of the inventory and the acquisition of raw materials are part of the inventory and warehousing cycle.