Exam 14: Audit of the Inventory and Distribution Cycle

An inventory observation procedure that compares physical counts with the perpetual inventory master file is an attempt to satisfy the audit objective of

Outline the key controls relating to compilation and pricing in the inventory cycle.

What are the five distinct activities used during the audit of the inventory cycle?

Obtaining an adequate understanding of the client's business is important in physical observation of inventory because

The existence of an adequate storeroom with a competent custodian in charge results in the orderly storage of inventory and can protect inventory from theft and misuse.How would an auditor assess these controls?

The form used to request the purchasing department to place orders for inventory items is the

Segregation of duties between production,inventory control,and accounting are important controls in the inventory and distribution cycle.How would the auditor test these controls?

When performing a financial statement audit,auditors are required to explicitly assess the risk of material misstatement due to

The auditor has determined that the inventory procedures are highly automated with limited use of a paper or physical trail.Rather than having people count inventory (since all inventory has RFID tags attached),inventory is being read using the wireless mesh network.To provide assurance with respect to ending inventory,the auditor should

The test of details of balance procedure that requires the auditor to perform tests of lower-of-cost-or-market,selling price,and obsolescence is an attempt to satisfy the objective of

Which three cycles is the inventory cycle interconnected with in a manufacturing company?

The test of details of balance procedure that requires the auditor to account for unused inventory tag numbers to make sure none have been omitted is an attempt to satisfy the objective of

The audit of the inventory and distribution cycle consists of five parts.State the five parts and,for each part,identify the cycle in which that part is tested by the auditor.

As part of the audit of valuation,the auditor is conducting pricing tests by comparing to supplier invoices.The auditor is making sure that,for each item tested,sufficient supplier invoices are examined to cover the quantity of inventory that was on hand during the physical inventory count.What type of pricing error could this detect?

The auditor evaluates the internal transfer of assets and related costs during the

XYZ Company uses standard costs for allocating costs to work-in-process and finished goods inventory.What internal control is required with respect to these costs to ensure proper valuation of inventory?

What is the first step that the auditor takes when auditing the valuation of inventory?

A common inventory observation procedure is to record in the working papers for subsequent follow-up the last shipping document number used at year-end.The audit objective being achieved by this procedure is

If the auditor concludes that the physical controls over inventory are so inadequate that inventory will be difficult to count,the auditor should

Analytical procedures applied to management's production cost reports provide evidence for which assertion(s)?