Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Question
Chapter 12, Problem 39P
a.
To determine
Explain the purpose of the defined controls.
b.
To determine
Explain the suitable test for the given procedure.
c.
To determine
Suggest substantive procedures in case of ineffective operations of the given cases.
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Analyze some common internal controls over inventories. Explain the significant inherent risks associated with inventory. Explain the process of physical inventory counts and the auditor’s observation of this process.
MULTIPLE CHOICE:
4. The procedures involve in the attendance at physical inventory counting
A. May serve as test of controls or substantive procedures depending on the auditor’s risk assessment , planned approach and the specific procedures carried out
B. Serve as risk assessment procedures
C. Serve as tests of controls
D. Serve as substantive procedures
5. An auditor selected items for test counts while observing a client’s physical inventory. The auditor then traced the test counts to the client’s inventory listing. This procedure most likely obtained evidence concerning management’s assertion of :
A. Valuation
B. Completeness
C. Rights and obligations
D. Existence or occurrence
when the auditor Watch employees count inventory to determine whether company procedures are being followed. What type of evidence he or she is obtaining :
Select one:
a. observation
b. inspection
c. confirmation
d. assurance
e. inquiry
Chapter 12 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 12 - Prob. 1RQCh. 12 - Explain the significance of the purchase order to...Ch. 12 - What segregation of duties would you recommend to...Ch. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - When perpetual inventory records are maintained,...
Ch. 12 - What is meant by a bill and hold scheme?Ch. 12 - What charges and credits may be disclosed in the...Ch. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - A well-prepared balance sheet usually includes a...Ch. 12 - Darnell Equipment Company uses the LIFO method of...Ch. 12 - Prob. 17RQCh. 12 - Prob. 18RQCh. 12 - Prob. 19RQCh. 12 - Prob. 20RQCh. 12 - Prob. 21QRACh. 12 - Prob. 22QRACh. 12 - Prob. 23QRACh. 12 - Prob. 24QRACh. 12 - Prob. 25QRACh. 12 - Prob. 26QRACh. 12 - Prob. 27QRACh. 12 - Grandview Manufacturing Company employs standard...Ch. 12 - Prob. 29AOQCh. 12 - Prob. 29BOQCh. 12 - The document issued by a common carrier...Ch. 12 - Which of the following should be included as a...Ch. 12 - Prob. 29EOQCh. 12 - Prob. 29FOQCh. 12 - Instead of taking a physical inventory count on...Ch. 12 - Prob. 29HOQCh. 12 - Prob. 29IOQCh. 12 - Prob. 29JOQCh. 12 - Prob. 29KOQCh. 12 - Prob. 29LOQCh. 12 - Prob. 30OQCh. 12 - Adapted AICPA Task-Based Simulation For each of...Ch. 12 - Prob. 32OQCh. 12 - Prob. 33OQCh. 12 - Prob. 34AOQCh. 12 - Prob. 34BOQCh. 12 - Prob. 34COQCh. 12 - Prob. 34DOQCh. 12 - Prob. 34EOQCh. 12 - Prob. 35OQCh. 12 - Prob. 36PCh. 12 - Prob. 37PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 41PCh. 12 - Prob. 42PCh. 12 - Prob. 43ITCCh. 12 - Prob. 44ECCh. 12 - Western Trading Company is a sole proprietorship...
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- Which of the following automated application controls would offer reasonable assurancethat inventory data were completely and accurately entered?a. Sequence checking.b. Batch totals.c. Limit tests.d. Check digits.arrow_forwardAssuming that the auditor properly documents receiving reportnumbers as a part of the physical inventory observation procedures, explain how theproper cutoff of purchases, including tests for the possibility of raw materials in transit,should be verified later in the auditarrow_forwardThe purpose of tracing a sample of inventory tags to a client’s computerized listing of inventory items is to determine whether the inventory itemsa. Represented by tags were included on the listing.b. Included on the listing were properly counted.c. Represented by tags were reduced to the lower of cost or market.d. Included in the listing were properly valued.arrow_forward
- An auditor usually traces 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 thephysical inventory count area. 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.arrow_forwardAn auditor selected items for test counts from the client’s warehouse during the physical inventory observation. The auditor then traced these test counts into the detailed inventory listing that agreed to the financial statements. This procedure most likely provided evidence concerning management’s assertion ofa. Rights and obligations.b. Completeness.c. Existence.d. Valuation.arrow_forwardThe primary reason why auditors observe client's physical inventory is to make sure the amount of inventory reported in the Statement of Financial Position actually exists and fully owned by the company.a. Explain various audit procedures that should be performed by auditor to determine the slow-moving or obsolete items included in the inventory count. What is the important of attendance of the auditors during the physical inventory count?arrow_forward
- A D REQUIRED: IDENTIFY THE ASSERTION[S] RELATED TO EACH AUDIT PROCEDURE ASSERTION[S] E= existence C=Completeness A=Accuracy Cl=Classification Cu=Cutoff V=Valuation RO=Rights & Procedure Obligations A Compare sales invoices with customer purchase orders В Compare selected items on the inventory list with the physical inventory.arrow_forwardMULTIPLE CHOICE: 1. Which of the following is not one of the independent auditor’s objectives regarding the audit of inventories? A. Verifying that the client has used proper inventory pricing B. Verifying the inventory counted is owned by the client C. Ascertaining the physical quantities of inventory on hand D. Verifying that all inventory owned by the client is on hand at the time of the count 2. A client maintains perpetual inventory records in both quantities and pesos. If the assessed level of control risk is high an auditor will probably A. Increase the extent of tests of controls relevant to the inventory cycle B. Request the client to schedule the physical inventory count at the end of the year C. Insist that the client perform physical counts of inventory items during the year D. Apply gross profit tests to ascertain the reasonableness of the physical counts 3. To ascertain whether inventories included in the statement of financial position physically exist, a CPA will…arrow_forward
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