Exam 20: Audit of the Inventory and Warehousing Cycle

Assume that the client's valuation of an inventory item is $10 per unit for 1,000 units,using first-in,first-out (FIFO).If the most recent acquisition of inventory was for 600 units at $10 per unit and the immediately preceding acquisition was for 700 units at $9 per unit,the inventory item is in error and it is:

In order to strengthen controls over cost accounting information,a company should consider implementing:

In process cost systems,costs are accumulated by individual jobs.

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

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:

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:

Internal controls over the ship finished goods function in the inventory and warehousing cycle are not normally tested by the auditor as a part of performing tests of controls and substantive tests of transactions in the sales and collection cycle.

The audit of the inventory and warehousing cycle will be affected by the results from other business processes.Identify the "other" business cycles and how they impact the audit of inventory.

When may auditors observe the physical inventory count?

Auditor tests of the physical controls over raw materials,work in process,and finished goods are generally limited to:

Handling the receipt of ordered goods is a part of the ________ cycle.

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.

A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of the:

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

A common source of business risk for inventory is the reliance on a few key suppliers.

Inventory is a complex area to audit for all but which of the following reasons?

The auditor's tour of the client's inventory facilities should be led by:

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:

From which of the following evidence-gathering audit procedures would an auditor obtain most assurance concerning the existence of inventories?

The audit of cost accounting begins with the internal transfer of assets from raw materials to work-in-process to: