Exam 21: Audit of the Inventory and Warehousing Cycle

The audit procedure "Account for unused tag numbers shown in the auditor's working papers to make sure no tags have been added" provides assurance mainly for the existence objective for inventory pricing and compilation.

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

Cost accounting controls are those related to the physical inventory and the consequent costs from the point at which:

The auditor's main concerns in verifying transfers of inventory do not include whether:

Almost all companies need physical controls over their assets to prevent loss. Which of the following is not an example of such a control?

While separate perpetual inventory records are normally kept for raw materials and finished goods, most companies do not use perpetual for work-in-process.

The major considerations in evaluating the reasonableness of cost allocations are compliance with GAAP and consistency with prior years.

McKesson & Robbins Company is a well-known audit case involving auditor responsibility. What occurred at the McKesson & Robbins Company to change the way in which auditors audit inventory?

State the six functions that make up the inventory and warehousing cycle and, for each function, identify the related documents and/or records that would be used by a manufacturing company.

A common inventory observation procedure is to be alert for items that are damaged, rust- or dust-covered, or located in inappropriate places. The balance-related audit objective being achieved by this procedure is:

The audit of the inventory and warehousing cycle will be affected by the results from other business processes. Identify the "other" business cycles and how they impact the audit of inventory.

You are auditing the inventory account and are concerned about the possibility of an inventory overstatement. What is the best audit procedure to detect damaged inventory?

Which of the following statements is correct regarding the auditor's responsibility with respect to the year-end inventory procedures of an audit client?

Johnson Co.'s physical count of inventories was lower than the inventory quantities shown in its perpetual records. This situation could be the result of the failure to record:

Master files, worksheets, and reports that accumulate material, labor, and overhead as the costs are incurred are:

When verifying the transfer of inventory from one location to another, the audit objectives with which the auditor is primarily concerned are occurrence of recorded transfers, completeness of recorded transfers, and accuracy of recorded transfers.

When auditing a public warehouse, which of the following is the most important audit procedure with respect to disclosing unrecorded liabilities?

Pricing manufactured inventory is difficult. Auditors must evaluate the method of allocating manufacturing overhead for all but which of the following?

When part of the client's inventory is in a public warehouse or in the possession of other outside custodians, the auditor does not need to observe a physical count of the inventory if a written confirmation is obtained directly from the inventory custodians.

Hardy Company mass-produces eight different products. The controller who is interested in strengthening internal controls over the accounting for materials used in production would be most likely to implement a(n):