Question 1

In an audit of inventories,an auditor would least likely verify that

Accepted Answer

A)  all inventory owned by the entity is on hand at the time of the count. 
B)  the entity 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 entity is on hand at the time of the count. 
B)  the entity 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 2

Tracing costs used to price inventory to vendors' invoices test which of the following assertions?

Accepted Answer

A)  Occurrence. 
B)  Cutoff. 
C)  Accuracy. 
D)  Classification. 
A)  Occurrence. 
B)  Cutoff. 
C)  Accuracy. 
D)  Classification.

Question 3

When the entity's perpetual inventory master files are inadequate,the auditor will probably choose to test the physical inventory prior to the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 4

Sale of finished goods is a part of the inventory management process.

Accepted Answer

A) True 
 B)False

Question 5

Purchase cutoff activities should be designed to test that merchandise is included in the inventory of the entity company if the company

Accepted Answer

A)  has paid for the merchandise. 
B)  has physical possession of the merchandise. 
C)  holds legal title to the merchandise. 
D)  holds the shipping documents for the merchandise issued in the company's name. 
A)  has paid for the merchandise. 
B)  has physical possession of the merchandise. 
C)  holds legal title to the merchandise. 
D)  holds the shipping documents for the merchandise issued in the company's name.

Question 6

An auditor generally tests physical security controls over inventory by

Accepted Answer

A)  test counts and cutoff procedures. 
B)  examination and reconciliation. 
C)  inspection and recomputation. 
D)  inquiry and observation. 
A)  test counts and cutoff procedures. 
B)  examination and reconciliation. 
C)  inspection and recomputation. 
D)  inquiry and observation.

Question 7

The audit of inventory is often the most involved aspect of an audit.Describe at least three inherent risk factors that affect the audit of inventory.

Accepted Answer

One inherent risk concerns the valuation

Question 8

In order to efficiently establish the correctness of the accounts payable cutoff,an auditor will be most likely to

Accepted Answer

A)  coordinate cutoff tests with physical inventory observation. 
B)  compare cutoff reports with purchase orders. 
C)  compare vendors' invoices with vendors' statements. 
D)  coordinate mailing of confirmations with cutoff tests. 
A)  coordinate cutoff tests with physical inventory observation. 
B)  compare cutoff reports with purchase orders. 
C)  compare vendors' invoices with vendors' statements. 
D)  coordinate mailing of confirmations with cutoff tests.

Question 9

A high inventory turnover ratio normally indicates inefficient inventory policies.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is a question that the auditor would expect to find on the production process section of an internal control questionnaire?

Accepted Answer

A)  Are vendors' invoices for raw materials approved for payment by an employee who is independent of the cash disbursements function? 
B)  Are signed checks for the purchase of raw materials mailed directly after signing without being returned to the person who authorized the invoice processing? 
C)  Are all releases by storekeepers of raw materials from storage based on approved requisition documents? 
D)  Are details of individual disbursements for raw materials balanced with the total to be posted to the appropriate general ledger account? 
A)  Are vendors' invoices for raw materials approved for payment by an employee who is independent of the cash disbursements function? 
B)  Are signed checks for the purchase of raw materials mailed directly after signing without being returned to the person who authorized the invoice processing? 
C)  Are all releases by storekeepers of raw materials from storage based on approved requisition documents? 
D)  Are details of individual disbursements for raw materials balanced with the total to be posted to the appropriate general ledger account?

Question 11

Which assertion for ending inventory is most likely violated if the gross profit percentage is much greater than last year?

Accepted Answer

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

Question 12

An auditor concluded that no excessive costs for an idle plant were charged to inventory.This conclusion most likely related to the auditor's objective to obtain evidence about the financial statement assertions regarding inventory,including presentation and disclosure,and

Accepted Answer

A)  valuation and allocation. 
B)  completeness. 
C)  existence. 
D)  rights and obligations. 
A)  valuation and allocation. 
B)  completeness. 
C)  existence. 
D)  rights and obligations.

Question 13

Explain the importance of observing physical inventory during an audit.

Accepted Answer

Inventory is typically a large account o

In an audit of inventories,an auditor would least likely verify that

Tracing costs used to price inventory to vendors' invoices test which of the following assertions?

When the entity's perpetual inventory master files are inadequate,the auditor will probably choose to test the physical inventory prior to the balance sheet date.

Sale of finished goods is a part of the inventory management process.

Purchase cutoff activities should be designed to test that merchandise is included in the inventory of the entity company if the company

An auditor generally tests physical security controls over inventory by

The audit of inventory is often the most involved aspect of an audit.Describe at least three inherent risk factors that affect the audit of inventory.

In order to efficiently establish the correctness of the accounts payable cutoff,an auditor will be most likely to

A high inventory turnover ratio normally indicates inefficient inventory policies.

Which of the following is a question that the auditor would expect to find on the production process section of an internal control questionnaire?

Which assertion for ending inventory is most likely violated if the gross profit percentage is much greater than last year?

An auditor concluded that no excessive costs for an idle plant were charged to inventory.This conclusion most likely related to the auditor's objective to obtain evidence about the financial statement assertions regarding inventory,including presentation and disclosure,and

Explain the importance of observing physical inventory during an audit.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters

Exam 13: Auditing the Inventory Management Process

In an audit of inventories,an auditor would least likely verify that

Tracing costs used to price inventory to vendors' invoices test which of the following assertions?

When the entity's perpetual inventory master files are inadequate,the auditor will probably choose to test the physical inventory prior to the balance sheet date.

Sale of finished goods is a part of the inventory management process.

Purchase cutoff activities should be designed to test that merchandise is included in the inventory of the entity company if the company

An auditor generally tests physical security controls over inventory by

The audit of inventory is often the most involved aspect of an audit.Describe at least three inherent risk factors that affect the audit of inventory.

In order to efficiently establish the correctness of the accounts payable cutoff,an auditor will be most likely to

A high inventory turnover ratio normally indicates inefficient inventory policies.

Which of the following is a question that the auditor would expect to find on the production process section of an internal control questionnaire?

Which assertion for ending inventory is most likely violated if the gross profit percentage is much greater than last year?

An auditor concluded that no excessive costs for an idle plant were charged to inventory.This conclusion most likely related to the auditor's objective to obtain evidence about the financial statement assertions regarding inventory,including presentation and disclosure,and

Explain the importance of observing physical inventory during an audit.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

Auditing the Financinginvesting Process: Cash and Investments

Completing the Audit Engagement

Reports on Audited Financial Statements

Professsional Conduct,Independence,and Quality Control

Legal Liability

Assurance,Attestation,amd Internal Auditing Services-professional Judgement Module

Filters