Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 21, Problem 20DQP
a.
To determine
Indicate an internal control that should have prevented the misstatement from occurring.
b.
To determine
Indicate a substantive
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Students have asked these similar questions
The following misstatements are included in the inventory and related records of Westbox Manufacturing Company:
4.After the auditor left the premises, several inventory tags were lost and were not included in the final inventory summary.
5.During the physical count, several obsolete inventory items were included.
6.Because of a significant increase in volume during the current year and excellent control over manufacturing overhead costs, the manufacturing overhead rate applied to inventory was far greater than actual cost.
7.An inventory item was priced at $12 each instead of at the correct cost of $12 per dozen.
Required For each misstatement, state an internal control that should have prevented it from occurring. For each misstatement, state a substantive audit procedure that can be used to uncover it.
1.
Please provide the type of audit procedures that was performed in the following actions or procedures:
Inquire of management whether they have properly identified obsolete inventory as at the balance sheet date ___________
Re-compute the unit sales price multiplied by the number of units for a sample of duplicate sales invoices, and compare the totals to the client’s calculations _____________________
Which one of the following statements is not true?
a. A company using the periodic system does not maintain a continuous record of the physical quantities (or costs) of inventory on hand.
b. In the periodic system, the costs of acquisition of inventory are not debited directly to an inventory account.
c. In the perpetual inventory system, recording in detailed subsidiary records can be in units only-not in dollar costs.
d. When the perpetual system is used, a physical count does not need to be made periodically.
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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- 1. On which of the following instances is cost estimation not permitted? A. Estimating the cost of inventory destroyed by fire or other natural calamities. B. Presenting the value of inventory in an interim financial statement. C. Reporting of inventory at the Statement of Financial Position at year-end. D. Estimating the value of inventory missing because of theft. 2. Under the gross profit method, if the gross profit rate is based on cost, the cost of sales is computed as A. Gross sales times cost ratio B. Net sales divided by sales ratio C. Net sales times cost ratio D. Gross sales divided by sales ratio 3. In computing cost ratio, the conservative/conventional retail method should A. Exclude mark-up but not markdown B. Include mark-up and markdown C. Exclude mark-up and markdown D. Include mark-up but not markdownarrow_forwardPerpetual inventory valuation system does not require.... a. physical count or measurement of inventory b. suspension of receipts and issue in the entire factory c. maintenance of inventory records d. suspension of receipts and issue in the entire factory, maintenance of inventory records and physical count or measurement of inventory.arrow_forwardThe DENR RO5 operates a perpetual inventory system and performs quarterly physical inventory counts to reflect actual quantities counted. During the auditor interim visit, the result of the last physical count is reviewed. It appears that several numbers of high-value items included in the records were not counted. Also, returns to the supplier are deducted from the physical inventory but are not recorded in the inventory records. Required: State the points of concern in your report to management with respect to the control issues and comment on their possible impact on your year-end audit work by identifying: a) weaknesses b) risks, and c) give recommendations.arrow_forward
- Management decided to undertake a physical inventory count in resolving a perceived weakness in the Company’s inventory control process. You have been appointed as the auditor of Small Limited.Required: Itemise the duties of the auditor in relation to inventories count under the following headings: Before the count, During the count After the countarrow_forward20.The gross profit method of estimating inventory would NOT be useful when a. a periodic system is in use and inventories are required for interim statements. b. inventories have been destroyed or lost by fire, theft or other casualty and the specific data required for inventory valuation are not available. c.the validity of inventory obtained by physical count is being established. d. the relationship between gross profit and sales continue to be unstable over time.arrow_forwardItems Included in Inventory The following are several items that Golosow Companys controller has questioned regarding their inclusion in inventory: a. An invoice has been received for goods ordered. The goods were shipped FOB destination but have not been received. b. Purchases have been ordered and received (shipping terms were FOB destination), but no invoice has arrived. c. Product was shipped to a customer today, FOB destination, and the invoice mailed. d. Purchases are in the receiving department, but they are damaged and will be returned. e. Product is in the shipping department, and the invoice has not been mailed to the customer. Shipping terms are FOB shipping point. f. Golosow has inventory in its possession from Tate Company. The inventory is to be sold by Golosow under a consignment arrangement with Tate. Required: 1. For each of the preceding items, indicate whether Golosow should include them in inventory. Justify your answer. 2. Next Level Describe the basic criterion for including items in inventory.arrow_forward
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