Question 1

Substantive audit procedures in the inventory process are

Accepted Answer

A) reviewing policies and procedures 
B) monitoring 
C) inquiry 
D) recalculation 
E) risk assessment
F)both A and C
G)both C and D
H)both D and E 
A) reviewing policies and procedures 
B) monitoring 
C) inquiry 
D) recalculation 
E) risk assessment
F)both A and C
G)both C and D
H)both D and E G

Question 2

Once inventory is recorded,it continues to be carried at the amount initially recognized unless

Accepted Answer

A) the market value increases over the initial cost 
B) the market value decreases below the initial cost 
C) the market value increases over the initial cost at year-end 
D) the cost to replace the inventory at year-end is below the initial cost of the inventory 
A) the market value increases over the initial cost 
B) the market value decreases below the initial cost 
C) the market value increases over the initial cost at year-end 
D) the cost to replace the inventory at year-end is below the initial cost of the inventory D

Question 3

The auditor must determine whether the inventory process transactions recorded in the revenue and expense accounts during the year

Accepted Answer

A) have been properly recorded in accordance with GAAS 
B) have been recorded in accordance with an applicable financial reporting framework 
C) are capable of being transferred to the owners equity account 
D) have comparable transactions on the balance sheet 
A) have been properly recorded in accordance with GAAS 
B) have been recorded in accordance with an applicable financial reporting framework 
C) are capable of being transferred to the owners equity account 
D) have comparable transactions on the balance sheet B

Question 4

In planning the audit,members of the audit team are required to have a team meeting to discuss the potential for misstatement due to fraud in the inventory process,including

Accepted Answer

A) the pressure on management to commit fraud 
B) the inevitability that fraud will be perpetuated in the company 
C) the general tone or environment in the company that may allow management to conceptualize committing fraud 
D) the general tone or environment in the company that may allow management to rationalize committing fraud 
E) the rationalization for fraud to be perpetrated in the company
F)both A and D
G)both C and E 
A) the pressure on management to commit fraud 
B) the inevitability that fraud will be perpetuated in the company 
C) the general tone or environment in the company that may allow management to conceptualize committing fraud 
D) the general tone or environment in the company that may allow management to rationalize committing fraud 
E) the rationalization for fraud to be perpetrated in the company
F)both A and D
G)both C and E

Question 5

According to FASB Concept Statement No.5,Recognition and Measurement in Financial Statements of Business Enterprises,assets are recorded at the price paid on the date of recognition.

Accepted Answer

A) True 
 B)False

Question 6

In the inventory process,the auditor typically uses only substantive testing due to the nature of the accounts in the business process.

Accepted Answer

A) True 
 B)False

Question 7

The accounts in the inventory process are

Accepted Answer

A) inventory 
B) purchasing 
C) allowance to increase inventory to LIFO value 
D) receiving 
E) allowance to reduce inventory to market value
F)both A and C
G)both B and D
H)Both A and E 
A) inventory 
B) purchasing 
C) allowance to increase inventory to LIFO value 
D) receiving 
E) allowance to reduce inventory to market value
F)both A and C
G)both B and D
H)Both A and E

Question 8

When an understatement misstatement in inventory occurs

Accepted Answer

A) cost of goods sold is understated 
B) net income is overstated 
C) inventory is overstated 
D) cost of goods sold is overstated 
E) net income is understated
F)both A and B
G)both D and E 
A) cost of goods sold is understated 
B) net income is overstated 
C) inventory is overstated 
D) cost of goods sold is overstated 
E) net income is understated
F)both A and B
G)both D and E

Question 9

Clients may understate inventory to reduce income tax expense.

Accepted Answer

A) True 
 B)False

Question 10

If the perpetual inventory files are accurate,the auditor can

Accepted Answer

A) accept the client's inventory valuation as correct 
B) assume that the stated quantities are present 
C) test the physical inventory before the balance sheet date 
D) test the physical inventory by reviewing receiving reports 
A) accept the client's inventory valuation as correct 
B) assume that the stated quantities are present 
C) test the physical inventory before the balance sheet date 
D) test the physical inventory by reviewing receiving reports

Question 11

The auditor should plan the audit of the inventory business process with the following presumption:

Accepted Answer

A) there is a risk of material misstatement due to fraud relating to inventory transactions. 
B) professional skepticism is necessary to find misstatements. 
C) planning the audit requires a questioning mind. 
D) the general environment or tone in the company may allow management to rationalize committing fraud. 
A) there is a risk of material misstatement due to fraud relating to inventory transactions. 
B) professional skepticism is necessary to find misstatements. 
C) planning the audit requires a questioning mind. 
D) the general environment or tone in the company may allow management to rationalize committing fraud.

Question 12

The cost accounting system determines

Accepted Answer

A) the cost of the inventory purchased by the company 
B) the cost of the inventory sold by the company 
C) the cost of the inventory shipped by the company 
D) the cost of the inventory manufactured by the company 
A) the cost of the inventory purchased by the company 
B) the cost of the inventory sold by the company 
C) the cost of the inventory shipped by the company 
D) the cost of the inventory manufactured by the company

Question 13

As with all income statement accounts,the inventory process expense accounts begin the year with

Accepted Answer

A) a total equal to the amount in accounts payable 
B) a total equal to the budgeted estimated expenses for the year 
C) ending balance from prior year 
D) a zero balance 
A) a total equal to the amount in accounts payable 
B) a total equal to the budgeted estimated expenses for the year 
C) ending balance from prior year 
D) a zero balance

Question 14

Automated inventory systems may be used to maintain control over inventory

Accepted Answer

A) in terms of keeping track of production quality 
B) in terms of keeping track of production quantities 
C) in terms of maintaining correct purchase history balances 
D) in terms of maintaining correct inventory balances 
E) in terms of maintaining correct shipping balances
F)both A and B
G)both B and D 
A) in terms of keeping track of production quality 
B) in terms of keeping track of production quantities 
C) in terms of maintaining correct purchase history balances 
D) in terms of maintaining correct inventory balances 
E) in terms of maintaining correct shipping balances
F)both A and B
G)both B and D

Question 15

When performing analytical procedures,what are "unexpected changes" and how does the auditor handle them?

Accepted Answer

Unexpected changes are changes between t

Question 16

The applicable financial reporting framework allows the audit client to determine both the cost and market value of inventory.Select the correct item(s)from the following list regarding these determinations:

Accepted Answer

A) The client must use FIFO to determine the cost of inventory at year-end.With FIFO,the client determines the cost of good sold using the earliest inventory items purchased. 
B) The client must use FIFO to determine the cost of inventory at year-end.With FIFO,the client determines the cost of good sold using the latest inventory items purchased. 
C) The client determines the market value of the inventory by using the last purchase price of the inventory item to estimate the market value. 
D) The client determines the market value of inventory by estimating the amount the inventory can be sold for at the end of the year. 
A) The client must use FIFO to determine the cost of inventory at year-end.With FIFO,the client determines the cost of good sold using the earliest inventory items purchased. 
B) The client must use FIFO to determine the cost of inventory at year-end.With FIFO,the client determines the cost of good sold using the latest inventory items purchased. 
C) The client determines the market value of the inventory by using the last purchase price of the inventory item to estimate the market value. 
D) The client determines the market value of inventory by estimating the amount the inventory can be sold for at the end of the year.

Question 17

Substantive audit procedures in the inventory process are

Accepted Answer

A) reviewing policies and procedures 
B) observation 
C) monitoring 
D) recalculation 
E) risk assessment
F)both A and C
G)both B and D
H)both D and E 
A) reviewing policies and procedures 
B) observation 
C) monitoring 
D) recalculation 
E) risk assessment
F)both A and C
G)both B and D
H)both D and E

Question 18

Market value is determined by

Accepted Answer

A) what the inventory item can be sold for 
B) what a competitor is selling the item for 
C) what the advertised price of the item is 
D) the cost of replacing the inventory item 
A) what the inventory item can be sold for 
B) what a competitor is selling the item for 
C) what the advertised price of the item is 
D) the cost of replacing the inventory item

Question 19

For the inventory process,management asserts that inventory exists at the income statement date and that the costs of goods sold transactions recorded in the inventory process occurred during the year.

Accepted Answer

A) True 
 B)False

Question 20

Describe the following audit procedures,providing an example of how each procedure could be used to gather evidence for the inventory process.
Inventory Process-Substantive tests
a.Inquiry
b.Observation
c.Inspection of documents
d.Analytical Procedures

Accepted Answer

a.Inquiry- the process of acquiring info

Substantive audit procedures in the inventory process are

Once inventory is recorded,it continues to be carried at the amount initially recognized unless

The auditor must determine whether the inventory process transactions recorded in the revenue and expense accounts during the year

In planning the audit,members of the audit team are required to have a team meeting to discuss the potential for misstatement due to fraud in the inventory process,including

According to FASB Concept Statement No.5,Recognition and Measurement in Financial Statements of Business Enterprises,assets are recorded at the price paid on the date of recognition.

In the inventory process,the auditor typically uses only substantive testing due to the nature of the accounts in the business process.

The accounts in the inventory process are

When an understatement misstatement in inventory occurs

Clients may understate inventory to reduce income tax expense.

If the perpetual inventory files are accurate,the auditor can

The auditor should plan the audit of the inventory business process with the following presumption:

The cost accounting system determines

As with all income statement accounts,the inventory process expense accounts begin the year with

Automated inventory systems may be used to maintain control over inventory

When performing analytical procedures,what are "unexpected changes" and how does the auditor handle them?

The applicable financial reporting framework allows the audit client to determine both the cost and market value of inventory.Select the correct item(s)from the following list regarding these determinations:

Substantive audit procedures in the inventory process are

Market value is determined by

For the inventory process,management asserts that inventory exists at the income statement date and that the costs of goods sold transactions recorded in the inventory process occurred during the year.

Describe the following audit procedures,providing an example of how each procedure could be used to gather evidence for the inventory process. Inventory Process-Substantive tests a.Inquiry b.Observation c.Inspection of documents d.Analytical Procedures

What Is Auditing

The Audit Planning Process: Understanding the Risk of Material Misstatement

Internal Controls

Auditing the Revenue Business Process

Audit Evidence and the Auditors Responsibility for Fraud Detection

Auditing the Acquisition and Expenditure Business Process

Audit Sampling: Tests of Internal Controls

Audit Sampling: Substantive Tests of Details

Cash and Investment Business Processes

Long-Term Debt and Owners Equity Business Process

Completing the Audit

Audit Reports

The Auditing Profession Glossary

Filters

Exam 7: Auditing the Inventory Business Process

Substantive audit procedures in the inventory process are

Once inventory is recorded,it continues to be carried at the amount initially recognized unless

The auditor must determine whether the inventory process transactions recorded in the revenue and expense accounts during the year

In planning the audit,members of the audit team are required to have a team meeting to discuss the potential for misstatement due to fraud in the inventory process,including

According to FASB Concept Statement No.5,Recognition and Measurement in Financial Statements of Business Enterprises,assets are recorded at the price paid on the date of recognition.

In the inventory process,the auditor typically uses only substantive testing due to the nature of the accounts in the business process.

The accounts in the inventory process are

When an understatement misstatement in inventory occurs

Clients may understate inventory to reduce income tax expense.

If the perpetual inventory files are accurate,the auditor can

The auditor should plan the audit of the inventory business process with the following presumption:

The cost accounting system determines

As with all income statement accounts,the inventory process expense accounts begin the year with

Automated inventory systems may be used to maintain control over inventory

When performing analytical procedures,what are "unexpected changes" and how does the auditor handle them?

The applicable financial reporting framework allows the audit client to determine both the cost and market value of inventory.Select the correct item(s)from the following list regarding these determinations:

Substantive audit procedures in the inventory process are

Market value is determined by

For the inventory process,management asserts that inventory exists at the income statement date and that the costs of goods sold transactions recorded in the inventory process occurred during the year.

Describe the following audit procedures,providing an example of how each procedure could be used to gather evidence for the inventory process. Inventory Process-Substantive tests a.Inquiry b.Observation c.Inspection of documents d.Analytical Procedures

What Is Auditing

The Audit Planning Process: Understanding the Risk of Material Misstatement

Internal Controls

Auditing the Revenue Business Process

Audit Evidence and the Auditors Responsibility for Fraud Detection

Auditing the Acquisition and Expenditure Business Process

Audit Sampling: Tests of Internal Controls

Audit Sampling: Substantive Tests of Details

Cash and Investment Business Processes

Long-Term Debt and Owners Equity Business Process

Completing the Audit

Audit Reports

The Auditing Profession Glossary

Filters