Question 1

Selecting a sample of cost accounting reports for labor and vouching it to time records is a procedure designed to test the ASB transaction assertion of

Accepted Answer

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

Question 2

An auditor will usually trace the details of the test counts made during the observation of physical inventory counts to a final inventory compilation.This audit procedure is undertaken to provide evidence that items physically present and observed by the auditor at the time of the physical inventory count are

Accepted Answer

A) Owned by the client. 
B) Not obsolete. 
C) Physically present at the time of the preparation of the final inventory schedule. 
D) Included in the final inventory schedule. 
A) Owned by the client. 
B) Not obsolete. 
C) Physically present at the time of the preparation of the final inventory schedule. 
D) Included in the final inventory schedule.

Question 3

Which of the following is the assertion with the highest inherent risk in auditing inventory?

Accepted Answer

A) Completeness. 
B) Rights. 
C) Existence. 
D) Properly classification on the balance sheet. 
A) Completeness. 
B) Rights. 
C) Existence. 
D) Properly classification on the balance sheet.

Question 4

The auditors of Mikel's Shops obtained the following information when performing cutoff testing procedures during their observation of Mikel's physical inventory count at December 31,2009:
When comparing the cutoff information to the sales records,the auditors found that all these shipments were recorded as 2011 sales.The goods shipped on bills of lading 1235 and 1236 were not counted in the inventory,but the goods on bill of lading 1237 and 1238 were included.
Required:
Prepare the appropriate journal entry to correct the cutoff error. $$\begin{array} { | l | r | r | r | r | } 
\hline \text { Bill of Lading Number } & 1235 & 1236 & 1237 & 1238 \
\hline \text { Date } & 12 / 31 / 11 & 12 / 31 / 11 & 1 / 2 / 11 & 1 / 2 / 11 \
\hline \text { Sales price } & \$ 12,000 & \$ 4,500 & \$ 18,000 & \$ 16,000 \
\hline \text { Cost of goods } & \$ 9,000 & \$ 3,000 & \$ 12,000 & \$ 12,000 \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { l l l } 
\text { Inven

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Auditors ______________________________ the inventory taking and make ________________________________,but they seldom _____________________________ the entire inventory.
Reference: Question also found in study guide

Accepted Answer

observe; t

Question 7

Inventory observation may need to be scheduled on the year-end date,making a large number of test counts if the test of controls ________________________________.
Reference: Question also found in study guide

Accepted Answer

reveals we

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

When auditing inventories,an auditor would least likely verify that

Accepted Answer

A) All inventory owned by the client is on hand at the time of the count. 
B) The client has used proper inventory pricing. 
C) The financial statement presentation of inventories is appropriate. 
D) Damaged goods and obsolete items have been properly accounted for. 
A) All inventory owned by the client is on hand at the time of the count. 
B) The client has used proper inventory pricing. 
C) The financial statement presentation of inventories is appropriate. 
D) Damaged goods and obsolete items have been properly accounted for.

Question 10

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 11

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 12

The typical functions of the production and conversion includes

Accepted Answer

A) Cash payments for raw materials purchased. 
B) Inventory planning and control. 
C) Purchase requisitioning and purchase ordering for inventory. 
D) Receiving of inventory shipments from vendors. 
A) Cash payments for raw materials purchased. 
B) Inventory planning and control. 
C) Purchase requisitioning and purchase ordering for inventory. 
D) Receiving of inventory shipments from vendors.

Question 13

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?

Accepted Answer

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

Question 14

________________________________ are used by the purchasing department to place orders for materials.
Reference: Question also found in study guide

Accepted Answer

Material r

Question 15

The sales forecast is the document that production uses to determine what to produce and when to produce it.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Mary Monitor,CPA,noted that ABC Co.received goods prior to year-end that were included in physical inventory but had not been recorded.In this case,which of the following adjustments should be made?

Accepted Answer

A) Debit Purchases/credit Cost of Goods Sold. 
B) None. 
C) Debit Inventory/credit Accounts Payable. 
D) Debit Cost of Goods Sold/credit Accounts Payable. 
A) Debit Purchases/credit Cost of Goods Sold. 
B) None. 
C) Debit Inventory/credit Accounts Payable. 
D) Debit Cost of Goods Sold/credit Accounts Payable.

Selecting a sample of cost accounting reports for labor and vouching it to time records is a procedure designed to test the ASB transaction assertion of

Which of the following is the assertion with the highest inherent risk in auditing inventory?

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

Auditors __ the inventory taking and make ,but they seldom _ the entire inventory. Reference: Question also found in study guide

Inventory observation may need to be scheduled on the year-end date,making a large number of test counts if the test of controls ________________________________. Reference: Question also found in study guide

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

When auditing inventories,an auditor would least likely verify that

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

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

The typical functions of the production and conversion includes

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?

________________________________ are used by the purchasing department to place orders for materials. Reference: Question also found in study guide

The sales forecast is the document that production uses to determine what to produce and when to produce it.

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

Mary Monitor,CPA,noted that ABC Co.received goods prior to year-end that were included in physical inventory but had not been recorded.In this case,which of the following adjustments should be made?

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

Selecting a sample of cost accounting reports for labor and vouching it to time records is a procedure designed to test the ASB transaction assertion of

Which of the following is the assertion with the highest inherent risk in auditing inventory?

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

Auditors ______________________________ the inventory taking and make ________________________________,but they seldom _____________________________ the entire inventory. Reference: Question also found in study guide

Inventory observation may need to be scheduled on the year-end date,making a large number of test counts if the test of controls ________________________________. Reference: Question also found in study guide

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

When auditing inventories,an auditor would least likely verify that

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

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

The typical functions of the production and conversion includes

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?

________________________________ are used by the purchasing department to place orders for materials. Reference: Question also found in study guide

The sales forecast is the document that production uses to determine what to produce and when to produce it.

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

Mary Monitor,CPA,noted that ABC Co.received goods prior to year-end that were included in physical inventory but had not been recorded.In this case,which of the following adjustments should be made?

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

Auditors __ the inventory taking and make ,but they seldom _ the entire inventory. Reference: Question also found in study guide