Exam 21: Audit of the Inventory and Warehousing Cycle

Auditing standards require that auditors satisfy themselves about the effectiveness of the client's methods of counting inventory and the reliance they can place on the client's representations about the quantities and physical condition of the inventories.To meet this requirement auditors must perform four activities.List below.

When auditing inventory cost accounting, the auditor is concerned with all of the following except for:

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

The inventory and warehousing cycle can be thought of as having two separate but closely related systems, one involving the actual physical flow of goods, and the other the:

Which one of the following analytical procedures would be most useful in alerting the auditor to the possibility of obsolete inventory?

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

The auditor traces inventory tags identified as non-owned during the physical observation to the inventory listing schedule to make sure these have not been included.This test satisfies the balance-related audit objective of:

The receipt of raw materials is a part of the acquisition and payment cycle.

Comparing the physical counts with the perpetual inventory master files satisfies the balance-related audit objective of:

The audit procedure "Foot the inventory listing schedules for raw materials, work-in-process, and finished goods" provides assurance mainly for the accuracy objective for inventory pricing and compilation.

The audit tests to verify that the client is using an inventory method which is generally accepted and to verify that physical counts were correctly summarized are performed during the audit of the:

You are gathering evidence for the audit objective that existing inventory items are included in the inventory listing schedule.The audit procedure that would provide you with the best evidence to confirm this objective is:

When there are no perpetual inventory files and inventory is material:

If an auditor were concerned with obtaining evidence about the appropriateness of the value of inventory, which of the following tests would be most appropriate?

When part of the client's inventory is in a public warehouse or in the possession of other outside custodians, the auditor does not need to observe a physical count of the inventory if a written confirmation is obtained directly from the inventory custodians.

When may auditors observe the physical inventory count?

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

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

The major concerns in performing inventory valuation tests are compliance with GAAP and consistency with prior years.

Auditors need to understand the client's physical inventory count controls before the count of the inventory begins so that: