Question 1

A client maintains perpetual inventory records in quantities and in dollars.If the assessed control risk is high,an auditor would probably

Accepted Answer

A)  Apply gross profit tests to ascertain the reasonableness of the physical counts. 
B)  Increase the extent of tests of controls relevant to the inventory cycle. 
C)  Request the client to schedule the physical inventory count at the end of the year. 
D)  Insist that the client perform physical counts of inventory items several times during the year. 
A)  Apply gross profit tests to ascertain the reasonableness of the physical counts. 
B)  Increase the extent of tests of controls relevant to the inventory cycle. 
C)  Request the client to schedule the physical inventory count at the end of the year. 
D)  Insist that the client perform physical counts of inventory items several times during the year.

Question 2

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

Accepted Answer

A)  Sales. 
B)  Sales discounts. 
C)  Purchases. 
D)  Purchase discounts. 
A)  Sales. 
B)  Sales discounts. 
C)  Purchases. 
D)  Purchase discounts.

Question 3

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

Accepted Answer

A)  The lower of cost or fair market value. 
B)  The lower of cost or net realizable value. 
C)  The higher of cost or net realizable value less a normal profit (floor). 
D)  None of the above. 
A)  The lower of cost or fair market value. 
B)  The lower of cost or net realizable value. 
C)  The higher of cost or net realizable value less a normal profit (floor). 
D)  None of the above.

Question 4

Tracing a sample of inventory receiving reports to the perpetual inventory record entry achieves the specific ASB balance assertion of

Accepted Answer

A)  Completeness. 
B)  Occurrence. 
C)  Presentation. 
D)  Valuation. 
A)  Completeness. 
B)  Occurrence. 
C)  Presentation. 
D)  Valuation.

Question 5

An inventory trial balance can be used to scan for __________________________________ and as a population for sample selection for the ______________________________________.

Accepted Answer

unusual co

Question 6

Production planning interacts with inventory planning to produce production orders.

Accepted Answer

A) True 
 B)False

Question 7

Inventory count tags are controlled

Accepted Answer

A)  To prevent counting errors. 
B)  To test cutoff. 
C)  To prevent subsequent addition of goods to the inventory. 
D)  For all of the above reasons. 
A)  To prevent counting errors. 
B)  To test cutoff. 
C)  To prevent subsequent addition of goods to the inventory. 
D)  For all of the above reasons.

Question 8

The auditors must be present during some counting operations to evaluate cycle inventory counting plans and the execution.

Accepted Answer

A) True 
 B)False

Question 9

Selecting inventory from locations on the warehouse floor,obtaining a test count,and tracing the count to the final inventory compilation produces evidence for the _____________________________ ASB balance assertion.

Accepted Answer

The answer of Selecting inventory from locations on the warehouse...

Question 10

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

Accepted Answer

A)  Trace additions to the general ledger. 
B)  Vouch additions to receiving reports. 
C)  Vouch additions to sales invoices. 
D)  Trace receipts to receiving reports. 
A)  Trace additions to the general ledger. 
B)  Vouch additions to receiving reports. 
C)  Vouch additions to sales invoices. 
D)  Trace receipts to receiving reports.

Question 11

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?

Accepted Answer

A)  Observe all counts at all locations by using the required number of auditors. 
B)  Insist the inventory be counted on separate days so the auditor can be present at all locations. 
C)  Work with the client to determine which locations to observe. 
D)  Observe a sample of locations on a surprise basis. 
A)  Observe all counts at all locations by using the required number of auditors. 
B)  Insist the inventory be counted on separate days so the auditor can be present at all locations. 
C)  Work with the client to determine which locations to observe. 
D)  Observe a sample of locations on a surprise basis.

Question 12

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.

Accepted Answer

1.C; 2.A;

Question 13

If overhead is miscalculated so that it is underabsorbed,the result if the error is not corrected will be that

Accepted Answer

A)  Inventory will be understated and net income will be overstated. 
B)  Inventory and net income will be overstated. 
C)  Inventory will be overstated and net income will be understated. 
D)  Inventory and net income will be understated. 
A)  Inventory will be understated and net income will be overstated. 
B)  Inventory and net income will be overstated. 
C)  Inventory will be overstated and net income will be understated. 
D)  Inventory and net income will be understated.

Question 14

If control risk is assessed very low,cost accumulations will require additional substantive procedures to lower the risk of failing to detect material misstatements in inventory.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following internal control activities most likely addresses the completeness assertion for inventory?

Accepted Answer

A)  The work-in-process account is periodically reconciled with subsidiary inventory records. 
B)  Employees responsible for custody of finished goods do not perform the receiving function. 
C)  Receiving reports are prenumbered and the numbering sequence is checked periodically. 
D)  There is a separation of duties between the payroll department and inventory accounting personnel. 
A)  The work-in-process account is periodically reconciled with subsidiary inventory records. 
B)  Employees responsible for custody of finished goods do not perform the receiving function. 
C)  Receiving reports are prenumbered and the numbering sequence is checked periodically. 
D)  There is a separation of duties between the payroll department and inventory accounting personnel.

Question 16

The overall production starts with production planning,which usually is based on a _______________________________________.

Accepted Answer

The answer of The overall production starts with production planning,which...

Question 17

The auditor tests the quantity of materials charged to work-in-process by vouching these quantities to

Accepted Answer

A)  Cost ledgers. 
B)  Perpetual inventory records. 
C)  Receiving reports. 
D)  Material requisitions. 
A)  Cost ledgers. 
B)  Perpetual inventory records. 
C)  Receiving reports. 
D)  Material requisitions.

Question 18

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

Accepted Answer

A)  Inspect documents. 
B)  Make inquiries. 
C)  Observe procedures. 
D)  Consider policy and procedure manuals. 
A)  Inspect documents. 
B)  Make inquiries. 
C)  Observe procedures. 
D)  Consider policy and procedure manuals.

Question 19

The functions typically related to inventory flow of transactions and control would not include

Accepted Answer

A)  Inventory record keeping. 
B)  Physical count of inventory. 
C)  Sale of inventory. 
D)  Reconciliation of physical count to perpetual inventory records. 
A)  Inventory record keeping. 
B)  Physical count of inventory. 
C)  Sale of inventory. 
D)  Reconciliation of physical count to perpetual inventory records.

Question 20

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

Accepted Answer

The answer of Match the examples of specific control assertions...

A client maintains perpetual inventory records in quantities and in dollars.If the assessed control risk is high,an auditor would probably

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

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

Tracing a sample of inventory receiving reports to the perpetual inventory record entry achieves the specific ASB balance assertion of

An inventory trial balance can be used to scan for and as a population for sample selection for the ____.

Production planning interacts with inventory planning to produce production orders.

Inventory count tags are controlled

The auditors must be present during some counting operations to evaluate cycle inventory counting plans and the execution.

Selecting inventory from locations on the warehouse floor,obtaining a test count,and tracing the count to the final inventory compilation produces evidence for the _____________________________ ASB balance assertion.

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

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?

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.

If overhead is miscalculated so that it is underabsorbed,the result if the error is not corrected will be that

If control risk is assessed very low,cost accumulations will require additional substantive procedures to lower the risk of failing to detect material misstatements in inventory.

Which of the following internal control activities most likely addresses the completeness assertion for inventory?

The overall production starts with production planning,which usually is based on a _______________________________________.

The auditor tests the quantity of materials charged to work-in-process by vouching these quantities to

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

The functions typically related to inventory flow of transactions and control would not include

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

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

Exam 9: Production Cycle

A client maintains perpetual inventory records in quantities and in dollars.If the assessed control risk is high,an auditor would probably

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

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

Tracing a sample of inventory receiving reports to the perpetual inventory record entry achieves the specific ASB balance assertion of

An inventory trial balance can be used to scan for __________________________________ and as a population for sample selection for the ______________________________________.

Production planning interacts with inventory planning to produce production orders.

Inventory count tags are controlled

The auditors must be present during some counting operations to evaluate cycle inventory counting plans and the execution.

Selecting inventory from locations on the warehouse floor,obtaining a test count,and tracing the count to the final inventory compilation produces evidence for the _____________________________ ASB balance assertion.

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

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?

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.

If overhead is miscalculated so that it is underabsorbed,the result if the error is not corrected will be that

If control risk is assessed very low,cost accumulations will require additional substantive procedures to lower the risk of failing to detect material misstatements in inventory.

Which of the following internal control activities most likely addresses the completeness assertion for inventory?

The overall production starts with production planning,which usually is based on a _______________________________________.

The auditor tests the quantity of materials charged to work-in-process by vouching these quantities to

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

The functions typically related to inventory flow of transactions and control would not include

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

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Finance and Investment Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

An inventory trial balance can be used to scan for and as a population for sample selection for the ____.