Exam 12: Inventories and Cost of Goods Sold

Observation of a client's inventory is a presumptively mandatory audit procedure. a.What part should the auditors play in planning the physical inventory? b.Describe the procedures performed by the auditors during their observation of a client's physical inventory. c.Why do the auditors document their inventory test counts in their working papers?

An auditor has accounted for a sequence of inventory tags and is now going to trace information on a representative number of tags to the inventory summary sheets.Which assertion does this procedure relate to most directly?

Purchase cutoff procedures should be designed to test whether all inventory:

Which of the following is an internal control weakness for a company whose inventory of supplies consists of a large number of individual items?

Which of the following best describes the reason for the auditors' review of the client's cost accounting system?

Purchase cutoff procedures should be designed to test that merchandise is included in the inventory of the client company,if the company:

The use of a tagging system for inventory taking is designed to prevent double counting of goods.

A receiving department compares inventory items received with copies of purchase orders.The purchase orders list the name of the vendor and do not list the quantities of the material ordered.Using the purchase orders,the receiving department is most likely to detect:

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

Which of the following is not a reason for the special significance attached by the auditors to the verification of inventories?

Which of the following best describes the reason that the auditors record their inventory test counts in the working papers?

The examination of warehouse receipts is not sufficient verification of a material amount of goods stored in public warehouses.

An auditor suspects that certain client employees are ordering merchandise for themselves over the Internet without recording the purchase or receipt of the merchandise.When vendors' invoices arrive,one of the employees approves the invoices for payment.After the invoices are paid,the employee destroys the invoices and the related vouchers.In gathering evidence regarding the fraud,the auditor most likely would select items for testing from the file of all

Which of the following is not one of the independent auditor's objectives regarding the examination of inventories?

Which of the following would an auditor most likely question included in calculation of the overhead rate for a company that manufactures a product?

The most reliable procedure for an auditor to use to test the existence of a client's inventory at an outside location would be to

After accounting for a sequence of inventory tags,an auditor traces a sample of tags to the physical inventory listing to obtain evidence that all items:

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

Which of the following is not true relating to the auditors' observation of the client's physical inventory?

Tracing copies of computer-prepared sales invoices to copies of the corresponding computer-prepared shipping documents provides evidence that