Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 9RQ
To determine
Explain the reference made by the auditor related to the inventory tags used by the client’s employees in the counting process.
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At the completion of an inventory observation, the controllerrequested the auditor to give him a copy of all recorded test counts to facilitate the correction of all discrepancies between the client’s and the auditor’s counts. Should the auditorcomply with the request? Why?
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 balance assertion ofa. Rights and obligations.b. Completeness.c. Existence.d. Valuation and allocation
An auditor often tries to acquire background knowledge of theclient’s industry as an aid to audit work. How does the acquisition of this knowledge aidthe auditor in distinguishing between obsolete and current inventory?
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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- 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. inquiryarrow_forwardExplain whether or not analytical review procedures wouldbe sufficient for the audit of the inventory.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_forward
- In the audit of inventory the auditor must perform important procedures prior to the actual observation. Identify the steps the auditor must take prior to the day the inventory is actually counted.arrow_forwardAn auditor selected items for test counts while observing a client’s physical inventory.The auditor traced the test counts to the client’s inventory listing. This procedurelikely obtained evidence about which balance-related audit objective for inventory?(1) Existence (3) Completeness(2) Rights and obligations (4) Realizable valuearrow_forwardAn 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_forward
- What is the primary purpose of analytical procedures performed during the planning stages of the audit? Please identify the warning signs that were revealed about the inventory balance during analytical procedures that were ignored by the auditors.arrow_forwardAnalyze 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.arrow_forwardHow might an auditor effectively use preliminary analytical procedures in the audit of various expense accounts, such as miscellaneous expenses? How might this enable the auditor to better understand the business and its environment? How do computer-assisted procedures impact this audit?arrow_forward
- 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 abovearrow_forwardWhich assertion is most likely being tested when an auditor vouches transactions from the sales Journal to the sales orders? a. cutoff b. rights c. completeness d. accuracyarrow_forwardWhen auditing inventories, an auditor would least likely verify thata. All inventory owned by the client is on hand at the time of the count.b. The client 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.arrow_forward
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