Exam 9: Production Cycle

Audit planning requires that the auditor consider possible inventory errors or frauds that might occur that could affect the financial statements.For each of the types of inventory errors listed in the following table,indicate what would be the possible effect in the inventory and cost of sales accounts: overstated,understated,or no effect.

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

The typical functions of the production and conversion includes

A sample from the perpetual inventory records meets the _____________________________ requirement to determine whether all recorded transactions are supported by reports and documents. Question also found in study guide

An auditor who wished to test for the existence or occurrence of inventory would most likely select a sample of inventory items from the perpetual records and

An auditor selected items for test counts while observing a client's physical inventory.The auditor then traced the test counts to the client's inventory listing.This procedure most likely obtained evidence concerning management's balance assertion of

Periodic or cycle counts of selected inventory items are made at various times during the year rather than during a single inventory count at year-end.Which of the following is necessary if the auditor plans to observe inventories at interim dates?

The auditors must be present when instructions are given to company personnel for conducting the physical inventory.

A client's physical count of inventories was higher than the inventory quantities shown in the perpetual records.This situation could be the result of the failure to record

An auditor selected a product recorded in the finished goods perpetual inventory subsidiary account.The auditor went to the warehouse and 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?

The production order is the document used to authorize the movement of raw materials from inventory to the production line.

An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management's balance assertions about

A company's cost accountant periodically reconciles job cost sheets to the work-in-process inventory accounts.This reconciliation is most likely performed to provide assurance that

When evaluating inventory controls,an auditor would be least likely to

A retailer's physical count of inventory was higher than that shown by the perpetual records.Which of the following could explain the difference?

From the auditors' point of view,inventory counts are more acceptable prior to the year end when

While observing a client's annual physical inventory,an auditor recorded test counts for several items and noticed that certain test counts were higher than the recorded quantities in the client's perpetual records.This situation could be the result of the client's failure to record

Items held on consignment with another company should not be included in a company's inventory.