Exam 13: Auditing the Inventory Management Process

An auditor selected items for test counts while observing an entity's physical inventory. The auditor then traced the test counts to the entity's inventory listing. This procedure most likely provided evidence concerning management's assertion of

To gain assurance that all inventory items in an entity's inventory listing schedule are valid, an auditor most likely would trace

An auditor concluded that no excessive costs for an idle plant were charged to inventory. This conclusion most likely related to the auditor's objective to obtain evidence about the financial statement assertions regarding inventory, including presentation and disclosure, and

Sale of finished goods is a part of the inventory management process.

The auditor tests the quantity of materials charged to work in process by tracing these quantities to

The physical count of inventory of a retailer was higher than shown in its perpetual records. Which of the following could explain the difference?

An entity maintains perpetual inventory records in both quantities and dollars. If the assessed level of control risk is high, an auditor would probably

Which of the following is a plausible explanation for a large increase in the number of days outstanding in inventory?

Which one of the following procedures would not be appropriate for an auditor in discharging his or her responsibilities concerning the entity's physical inventories?

Shipping orders are forwarded from the revenue process to

When the entity's perpetual inventory master files are inadequate, the auditor will probably choose to test the physical inventory prior to the balance sheet date.

The major control procedure for preventing fictitious inventory transactions from being recorded is proper segregation of duties.

In a manufacturing company, which one of the following audit procedures would give the least assurance about the valuation of inventory at the audit date?

The audit of inventory is often the most involved aspect of an audit. Describe at least three inherent risk factors that affect the audit of inventory.

The audit of the inventory management process is affected by the audit results from multiple other processes. Identify the processes, other than the inventory management process, that affect the audit of inventory and explain how each affect the audit of inventory.

Inherent risk is typically assessed at a low to moderate level for inventory due to the nature of the asset.

A receiving report records the shipment of goods to customers.

Obsolete inventory should be written down to its current market value.

Which of the following departments typically approves purchase requisitions?

Purchase cutoff activities should be designed to test that merchandise is included in the inventory of the entity company if the company