Which of the following audit procedures is the best test of the accuracy, valuation and allocation assertion for inventory? Select one: a. Obtaining the last receiving record numbers for the period and checking that they were taken up correctly b. Confirming stock held on consignment c. Comparing standard costs to actual sales prices. d. Attending the annual stocktake

Which of the following audit procedures is the best test of the accuracy, valuation and allocation assertion for inventory? Select one: a. Obtaining the last receiving record numbers for the period and checking that they were taken up correctly b. Confirming stock held on consignment c. Comparing standard costs to actual sales prices. d. Attending the annual stocktake

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter11: Auditing Inventory, Goods And Services, And Accounts Payable: The Acquisition And Payment Cycle

Section: Chapter Questions

Problem 32CYBK

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Which of the following is an analytical procedure? a. Analysis of significant ratios and trends b. Physical valuation of inventory c. Confirming the balances of accounts d. Inspection of the documents
In the auditor's perspective, what is the ideal timing of the inventory count procedures? * A. Several times during the period under audit B. Before the balance sheet date C. At the balance sheet date D. After the balance sheet date E. None of the above
As part of your audit of a client's inventory balance, you created an expectation of what should be the inventory balance by using the gross profit method. The difference between your expectation using the gross profit method of estimating inventory as against the client reported balance is above audit materiality level for audit of inventory. What should you do next? a. Discuss with the management the implication of the significant difference and propose an adjusting journal entry accordingly.b. Extend audit procedures by doing further analytical procedures on the inventory balance.c. Extend audit procedures by doing test of details of the account balance.d. Issue a qualified opinion on the basis of a material misstatement in the client's inventory.e. None of the above
When auditing merchandise inventory at year-end, the auditor performs audit procedures toensure that all goods purchased before year-end are received before the physical inventorycount. This audit procedure provides assurance about which management assertion?a. Cutoff.b. Existence.c. Valuation and allocation.d. Rights and obligations.e. Occurrence.
When verifying debits to the perpetual inventory records of a nonmanufacturing company, auditors would be most interested in examining a sample of purchasea. Approvals.b. Requisitions.c. Invoices.d. Orders.
Accountants at UltraTech obtain their values for inventory and total assets, calculate the balance sheet percentage by dividing inventory by total assets for each year and summarize the observations for the relative size of inventory to total assets for each year and percentage change from year-to-year. This would allow them to effectively assess: a. Inventory control compared to competitorsb. If there is an effective return on assetsc. If inventory is being properly managedd. How they are managing liabilities
An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management’s balance assertions abouta. Existence.b. Rights and obligations.c. Completeness.d. Valuation and allocation.
The auditor observes the client's inventory test counts and locates the items on the client's inventory listing to test for which of the following financial statement assertions? 1. Completeness. 2. Rights and obligations. 3. Allocation and valuation. 4. Understandability and classification. O 1 O 2 O 3 O 4
Choose the one correct answer. As part of your audit of a client's inventory balance, you created an expectation of what should be the inventory balance by using the gross profit method. The difference between your expectation using the gross profit method of estimating inventory as against the client reported balance is above audit materiality level for audit of inventory. What should you do next? a. Discuss with the management the implication of the significant difference and propose an adjusting journal entry accordingly.b. Extend audit procedures by doing further analytical procedures on the inventory balance.c. Extend audit procedures by doing test of details of the account balance.d. Issue a qualified opinion on the basis of a material misstatement in the client's inventory.e. None of the above
Which of the following is a substantive test in relation to completeness? a.Inspect physical inventory, checking from physical stock to inventory records. b.Enquire of management and scan inventory records to identify any obsolete, excess or slow-moving inventory. c.Inspect physical inventory, checking from inventory records to physical stock. d.Recalculate depreciation or depletion calculations.
To make a year-to-year comparison of inventory turnover most meaningful, the auditor performs the analysisa. For the company as a whole.b. By division.c. By product.d. All of the above.
1)Which of the following is not an audit procedure for inventories? a)Review cut-off of inventory transactions. b)Take an inventory to ensure all items are counted. c)Test inventory pricing. d)Determine whether inventories have been pledged as collateral for loans. 2) Price testing of inventory items includes: a)agreeing recorded inventory amounts to receiving reports. b)agreeing recorded inventory amounts to recorded test counts. c)agreeing recorded inventory amounts to purchase invoices. d)agreeing recorded inventory amounts to sales prices. 3)Procedures designed to identify obsolete inventory include: a)performing test counts of inventory. b)vouching inventory items to purchase invoices. c)comparison of inventory recorded amounts to current sales prices. d)reviewing shipping and receiving documents around period end. 4)Which of the following is not conducive to effective internal control over inventories? a)All goods should be received by the receiving…