Exam 14: Audit of the Inventory and Distribution Cycle

The auditor is determining which specific inventory items should be selected for pricing tests.The auditor has selected a representative sample,and those items that have a large dollar amount.In addition,the auditor should select those items that

Discuss the methodology for designing tests of details of balances for inventory.

What are the factors that increase inherent risks for the accounts within the inventory cycle?

Sample size in physical observation of inventory is

The auditor would like to test the existence and accuracy of the transfer of goods from the raw materials storeroom to the manufacturing assembly lines.Which of the following audit procedures should be used?

The test of details of balance procedure that requires the auditor to review contracts with suppliers and customers and inquire of management for the possibility of the inclusion of consigned or other non-owned inventory is an attempt to satisfy the objective of

To detect an overstatement or understatement of inventory and cost of goods sold,the auditor may perform an analytical procedure such as comparing

It is frequently possible to test the physical inventory prior to the balance sheet date when

The overall objective in the audit of the inventory and distribution cycle is to determine that

Describe the major risks of error or fraud in the inventory and distribution cycle using the headings of i)risks of error,ii)risks of misappropriation of assets,other fraud,or illegal acts,and iii)risks of inadequate disclosure or incorrect presentation of financial information,including fraudulent financial reporting.

Outline some examples of fraud-related procedures that could be performed for the inventory and distribution cycle.

The auditor must verify whether the physical counts were correctly summarized,the inventory quantities and prices were correctly extended,and the extended inventory was correctly footed.These tests are called

Which of the following is correct relating to "fraud risk factor"?

When considering pricing of inventory,three things are important.The first two are that the method must be in accordance with an acceptable financial accounting framework,and the application of the method must be consistent from year to year.What is the third?

Controls that provide a means of ensuring that the physical counts are properly summarized,priced at the same amount as the unit records,correctly extended and totalled,and included in the general ledger at the proper amount are known as