Exam 9: Production Cycle

An auditor is examining a nonpublic company's inventory procurement system and has decided to perform tests of controls.Under which of the following conditions should the auditor perform tests of controls?

The tests of controls for inventory records would include the following procedures. A. Existence. B. Rights and obligations. C. Completeness. D. Accuracy and valuations. E. Presentation and disclosure. For each of the procedures, place the letter of the correct ASB balance assertion(s). Only one letter per procedure should be used.

Maple Company has an increase in purchases from specific vendors and an increase in raw materials inventory for the items purchased from these vendors.Sales for the company have not increased and are not forecast to increase.From this information an auditor might suspect

Which of the following auditing procedures probably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?

Your client plans to count inventory at several locations on the same day.No location is material in amount,but the total of inventory is quite material.How is an auditor likely to plan to observe?

An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management's financial statement (PCAOB)assertion of

Which cycle is not directly linked to the production cycle?

Generally accepted accounting principles (GAAP)require that inventory be recorded at

Inventory count tags are controlled

When a production plan is complete the production planner needs to determine

Production reports of finished units should be signed by the __________________________________ and finished goods inventory custodian and forwarded to _______________________________. Question also found in study guide

To determine the client's planned amount and timing of production of a product,the auditor will review the

Inventory observation must be observed if inventory is one of the major assets listed on the balance sheet.

An inventory roll back is required when inventory is counted prior to the end of the year.

The cost accounting department at Blue Manufacturing Company receives various types of information at the end of each week.The production floor reports time and production work data directly to the cost accounting department.Also,the payroll department sends labor cost data to the cost accounting department.What is the cost accounting department likely to do with this information? Why?

Match the examples of specific control assertions in the production cycle with the ASB transaction assertions.

Your client counts inventory three months before the end of the fiscal year.Internal controls over inventory are excellent.Which procedure is not necessary for the inventory roll-forward?

An auditor selected a product maintained in the finished goods warehouse.The auditor counted the product and compared this amount with the amount in the finished goods perpetual inventory subsidiary account.Which ASB balance assertion is the auditor most likely testing?

Auditors record the last bill of lading used at the time of the inventory count to

A comparison of the prior year's sales forecast with actual sales may provide an indication of slow moving inventory.