Question 1

If control risk is assessed high,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 2

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

Accepted Answer

production

Question 3

With a sample of open and closed production cost reports,vouching labor cost to ________________________________ is a test for ____________________________.
Reference: Question also found in study guide

Accepted Answer

labor repo

Question 4

An auditor selected an inventory item on the warehouse floor,test counted it,and traced the count to the final inventory compilation.The auditor most likely was testing the PCAOB assertion of

Accepted Answer

A) Existence. 
B) Valuation. 
C) Completeness. 
D) Rights and obligations. 
A) Existence. 
B) Valuation. 
C) Completeness. 
D) Rights and obligations.

Question 5

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 6

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

Accepted Answer

A) An increase in obsolete raw material inventory. 
B) Theft of raw material inventory. 
C) Kickbacks from vendors 
D) Poor security over raw material inventory. 
A) An increase in obsolete raw material inventory. 
B) Theft of raw material inventory. 
C) Kickbacks from vendors 
D) Poor security over raw material inventory.

Question 7

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 8

Inventory that is not used to produce finished goods should be accounted for as scrap inventory.

Accepted Answer

A) True 
 B)False

Question 9

The audit procedures used in an observation of the client's physical inventory taking are designed primarily to

Accepted Answer

A) Test and observe the client's physical count of inventory. 
B) Verify independently the physical counts obtained by the client. 
C) Assist the client in taking test counts of year-end inventory. 
D) Determine whether inventory contains obsolete goods. 
A) Test and observe the client's physical count of inventory. 
B) Verify independently the physical counts obtained by the client. 
C) Assist the client in taking test counts of year-end inventory. 
D) Determine whether inventory contains obsolete goods.

Question 10

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.

Accepted Answer

a.If book inventory is adjusted to agree

Question 11

An auditor's observation procedures for inventory may be performed during or after the end of the period under audit under which of the following conditions?

Accepted Answer

A) When the client maintains periodic inventory records. 
B) When the auditor finds minimal variations in client records and test counts in prior periods. 
C) When total inventory has not varied more than 5% in the last five years. 
D) When well-kept perpetual inventory records are checked by the client periodically by comparisons with physical counts. 
A) When the client maintains periodic inventory records. 
B) When the auditor finds minimal variations in client records and test counts in prior periods. 
C) When total inventory has not varied more than 5% in the last five years. 
D) When well-kept perpetual inventory records are checked by the client periodically by comparisons with physical counts.

Question 12

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?

Accepted Answer

A) Existence 
B) Completeness 
C) Rights and obligations 
D) Valuation 
A) Existence 
B) Completeness 
C) Rights and obligations 
D) Valuation

Question 13

Vouching a sample of items from the perpetual inventory records to the receiving reports 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 14

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

Accepted Answer

A) What raw materials need to be ordered. 
B) Labor rates for the jobs are needed to produce the orders. 
C) Which vendors need to supply raw materials. 
D) What equipment needs to be purchased to meet production quotas. 
A) What raw materials need to be ordered. 
B) Labor rates for the jobs are needed to produce the orders. 
C) Which vendors need to supply raw materials. 
D) What equipment needs to be purchased to meet production quotas.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) Valuation or allocation. 
B) Rights and obligations. 
C) Existence or occurrence. 
D) Presentation and disclosure. 
A) Valuation or allocation. 
B) Rights and obligations. 
C) Existence or occurrence. 
D) Presentation and disclosure.

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

A material error or fraud in inventory typically has a _________________________________ on financial statements.
Reference: Question also found in study guide

Accepted Answer

The answer of A material error or fraud in inventory...

Question 19

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 20

Cost accounting is responsible for reconciling inventory usage with production.

Accepted Answer

A) True 
 B)False

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

Production reports of finished units should be signed by the ____ and finished goods inventory custodian and forwarded to _. Reference: Question also found in study guide

With a sample of open and closed production cost reports,vouching labor cost to ____ is a test for . Reference: Question also found in study guide

An auditor selected an inventory item on the warehouse floor,test counted it,and traced the count to the final inventory compilation.The auditor most likely was testing the PCAOB assertion of

Inventory count tags are controlled

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

Inventory that is not used to produce finished goods should be accounted for as scrap inventory.

The audit procedures used in an observation of the client's physical inventory taking are designed primarily to

An auditor's observation procedures for inventory may be performed during or after the end of the period under audit under which of the following conditions?

Vouching a sample of items from the perpetual inventory records to the receiving reports achieves the specific ASB balance assertion of

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

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

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

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

A material error or fraud in inventory typically has a _________________________________ on financial statements. Reference: 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

Cost accounting is responsible for reconciling inventory usage with production.

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 Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 9: Production Cycle

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

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

With a sample of open and closed production cost reports,vouching labor cost to ________________________________ is a test for ____________________________. Reference: Question also found in study guide

An auditor selected an inventory item on the warehouse floor,test counted it,and traced the count to the final inventory compilation.The auditor most likely was testing the PCAOB assertion of

Inventory count tags are controlled

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

Inventory that is not used to produce finished goods should be accounted for as scrap inventory.

The audit procedures used in an observation of the client's physical inventory taking are designed primarily to

An auditor's observation procedures for inventory may be performed during or after the end of the period under audit under which of the following conditions?

Vouching a sample of items from the perpetual inventory records to the receiving reports achieves the specific ASB balance assertion of

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

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

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

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

A material error or fraud in inventory typically has a _________________________________ on financial statements. Reference: 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

Cost accounting is responsible for reconciling inventory usage with production.

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 Audits, Governmental Audits, and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Production reports of finished units should be signed by the ____ and finished goods inventory custodian and forwarded to _. Reference: Question also found in study guide

With a sample of open and closed production cost reports,vouching labor cost to ____ is a test for . Reference: Question also found in study guide