Exam 21: Audit of the Inventory and Warehousing Cycle

When performing price tests for purchased inventory,the auditor would not be concerned with the most recent vendors' invoices if the client uses the FIFO valuation method.

The most important part of the observation of inventory is to determine whether

An auditor must inquire about consigned or customer inventory included on the client's premises to satisfy the balance-related audit objective of

________ is normally characterized as a difficult and complex account to audit.

When performing inventory valuation tests,the auditor must be concerned that the method is in accordance with accounting standards.

The first step in verifying the valuation of purchased inventory is in determining the valuation method used by the client.The next step is

Pricing manufactured inventory is difficult.Auditors must evaluate the method of allocating manufacturing overhead for all but which of the following?

The audit of year-end physical inventories should include steps to verify that the client's purchases and sales cutoffs were adequate.The audit steps should be designed to detect whether merchandise included in the physical count at year-end was not recorded as a

When determining the sample size for the number of items the auditor should count during the physical inventory,

A common inventory observation procedure is to select a random sample of tag numbers and identify the tag with that number attached to the actual inventory item.The audit objective being achieved by this procedure is

Which one of the following substantive analytical procedures would be most useful in alerting the auditor to the possibility inventory and cost of goods sold being overstated or understated?

Almost all companies need physical controls over their assets to prevent loss.Which of the following is not an example of such a control?

When labor is a significant part of inventory,verifying the proper accounting of these costs should be tested in the

Receipt of ordered materials by the receiving department will generate the completion of a form called the

Auditor tests of physical controls over raw materials,work-in-process,and finished goods are performed by

To test for proper sales cutoff,an auditor would obtain the number of the last bill of lading issued during the period under audit and verify that the item shipped had been excluded from the inventory listing.

Discuss the key control procedures relating to the client's physical count of inventory.

The physical observation of the inventory and the acquisition of raw materials are part of the inventory and warehousing cycle.

You are auditing the inventory account and are concerned about the possibility of an inventory overstatement.What is the best audit procedure to detect damaged inventory?

An approved purchase requisition form authorizes shipment of goods to customers.