Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 21, Problem 14.3MCQ
To determine
Identify whetherthe inventory turnover analysis is useful to the auditor.
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Which of the following is not an advantage of a perpetual inventory system?
a. Assists in the prevention of stockouts
b. Requires less data processing effort than periodic systems
c. Maintains up-to-date inventory and cost of goods sold balances
d. Provides evidence of inventory shrinkage
Which of the following is not an advantage of a perpetual inventory system?
a. assits in the prevention of stockouts
b. requires less data processing effort than periodic system
c. maintains up-to-date inventory and cost of goods sold balances
d. provides evidence of inventory shrinkage
Some inventory errors are said to be “self-correcting,” in that the error has the opposite financial statement effectin the period following the error, thereby “correcting,” the original account balance errors.Required:Despite this self-correcting feature, discuss why these errors should not be ignored and describe the steps requiredto account for the error correction.
Chapter 21 Solutions
Auditing And Assurance Services
Ch. 21 - Prob. 1RQCh. 21 - Prob. 2RQCh. 21 - Prob. 3RQCh. 21 - Prob. 4RQCh. 21 - Prob. 5RQCh. 21 - Prob. 6RQCh. 21 - Prob. 7RQCh. 21 - Prob. 8RQCh. 21 - Prob. 9RQCh. 21 - Prob. 10RQ
Ch. 21 - Prob. 11RQCh. 21 - Each employee of the Gedding Manufacturing Co., a...Ch. 21 - Prob. 13.1MCQCh. 21 - Prob. 13.2MCQCh. 21 - Prob. 13.3MCQCh. 21 - Prob. 14.1MCQCh. 21 - Prob. 14.2MCQCh. 21 - Prob. 14.3MCQCh. 21 - Prob. 15.1MCQCh. 21 - Prob. 15.2MCQCh. 21 - Prob. 15.3MCQCh. 21 - Prob. 16DQPCh. 21 - Prob. 17DQPCh. 21 - Prob. 18DQPCh. 21 - Prob. 19DQPCh. 21 - Prob. 20DQPCh. 21 - Prob. 21DQPCh. 21 - Prob. 22DQPCh. 21 - Prob. 23DQPCh. 21 - Prob. 24DQPCh. 21 - Prob. 25DQPCh. 21 - Prob. 26DQPCh. 21 - Prob. 27DQPCh. 21 - Prob. 28DQPCh. 21 - Prob. 29DQPCh. 21 - Prob. 30C
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- What is inventory turnover ratio time study observation? Time Formulas and standard data and what are the methods to remove error in time measurement?arrow_forwardWhich 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.arrow_forwardWhat is the major advantage of using a perpetual inventory system? a.) It provides efficient internal control over materials. b.) It avoids inventory shortages and overages. c.) It minimizes error in posting receipts and issues of materials. d.) It avoids losses due to theft.arrow_forward
- Which of the following is false regarding a perpetualinventory system?a. Physical counts are never needed because records aremaintained on a transaction-by-transaction basis.b. The Inventory records are updated with each inventorypurchase, sale, or return transaction.c. Cost of Goods Sold is increased as sales are recorded.d. A perpetual inventory system can be used to detectshrinkagearrow_forwardAn inventory roll-forward is a kind of inventory management. Exactly what kind of forward-looking testing should be carried out?arrow_forwardWhy is inherent risk for the existence of inventory an issue in the expenditure cycle audit?arrow_forward
- Explain the following statement: “Inventory errors correct themselves.”arrow_forwardWhat analytical procedures might reveal obsolete or slow-moving inventory?arrow_forwardOne reason for inventory is to prevent shutdowns. How does the JIT approach to inventory management deal with this potential problem?arrow_forward
- Which of the following is a disadvantage of the perpetual inventory system? A. Inventory information is in real-time. B. Inventory is automatically updated. C. It allows managers to make current decisions about purchases, stock, and sales. D. It is cost-prohibitive.arrow_forwardWhat type of issues would arise that might cause inventory errors?arrow_forwardWhy do consignment arrangements present a challenge in inventory management? Explain.arrow_forward
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