Question 1

The auditor uses substantive tests of balances in the inventory process to

Accepted Answer

A) gather evidence for income statement accounts in the business process 
B) gather evidence for balance sheet accounts in the business process 
C) determine the valuation of income statement accounts in the business process 
D) determine the valuation for balance sheet accounts in the business process 
E) Both B and D 
A) gather evidence for income statement accounts in the business process 
B) gather evidence for balance sheet accounts in the business process 
C) determine the valuation of income statement accounts in the business process 
D) determine the valuation for balance sheet accounts in the business process 
E) Both B and D

Question 2

The appropriate journal entry for the transactions involving the LIFO reserve and market value adjustments is determined by the particular situation in the firm.If LIFO inventory is greater than FIFO inventory,

Accepted Answer

A) cost of goods sold is credited 
B) cost of goods sold is debited 
C) the allowance account is debited 
D) the allowance account is credited 
E) the LIFO reserve account is debited
F)both A and C
G)both B and D 
A) cost of goods sold is credited 
B) cost of goods sold is debited 
C) the allowance account is debited 
D) the allowance account is credited 
E) the LIFO reserve account is debited
F)both A and C
G)both B and D

Question 3

When the auditor tests the inventory records,

Accepted Answer

A) he must understand how direct labor is charged 
B) he must understand how raw materials are received 
C) he must understand how overhead is incurred 
D) he must understand the internal controls in the cost accounting system 
A) he must understand how direct labor is charged 
B) he must understand how raw materials are received 
C) he must understand how overhead is incurred 
D) he must understand the internal controls in the cost accounting system

Question 4

The client may use a variety of methods to overstate inventory.These include

Accepted Answer

A) inaccurate purchase history 
B) inaccurate inventory expense recording 
C) incorrect recognition of customer rebates 
D) incorrect LIFO reserve calculations 
E) failure to write-off obsolete inventory
F)both A and C
G)both D and E 
A) inaccurate purchase history 
B) inaccurate inventory expense recording 
C) incorrect recognition of customer rebates 
D) incorrect LIFO reserve calculations 
E) failure to write-off obsolete inventory
F)both A and C
G)both D and E

Question 5

The transactions audited in the inventory process include

Accepted Answer

A) determining the correct quantity of the inventory 
B) internal controls relevant to transactions 
C) pricing the inventory according to accounting standards 
D) internal controls relevant to balances 
E) valuing the year-end inventory transactions
F)Both A and C 
A) determining the correct quantity of the inventory 
B) internal controls relevant to transactions 
C) pricing the inventory according to accounting standards 
D) internal controls relevant to balances 
E) valuing the year-end inventory transactions
F)Both A and C

Question 6

The lower-of-cost-or-market account is

Accepted Answer

A) a temporary balance sheet account 
B) a permanent income statement account 
C) a temporary income statement account 
D) a permanent balance sheet account 
A) a temporary balance sheet account 
B) a permanent income statement account 
C) a temporary income statement account 
D) a permanent balance sheet account

Question 7

The auditor uses substantive tests of balances to gather evidence for

Accepted Answer

A) income statement accounts in the inventory process 
B) income statement transactions in the inventory process 
C) balance sheet accounts in the inventory process 
D) balance sheet transactions in the inventory process 
A) income statement accounts in the inventory process 
B) income statement transactions in the inventory process 
C) balance sheet accounts in the inventory process 
D) balance sheet transactions in the inventory process

Question 8

The client may use a variety of methods to overstate inventory.These include

Accepted Answer

A) inaccurate inventory counts 
B) inaccurate inventory expense recording 
C) incorrect recognition of customer rebates 
D) incorrect FIFO reserve calculations 
E) failure to write-off obsolete inventory
F)both A and E
G)both B and D 
A) inaccurate inventory counts 
B) inaccurate inventory expense recording 
C) incorrect recognition of customer rebates 
D) incorrect FIFO reserve calculations 
E) failure to write-off obsolete inventory
F)both A and E
G)both B and D

Question 9

Because the most likely misstatement in the inventory process is an overstatement misstatement,

Accepted Answer

A) accuracy and valuation are often identified as relevant assertions for this process 
B) cutoff and valuation are often identified as relevant assertions for this process 
C) classification and valuation are often identified as relevant assertions for this process 
D) existence and valuation are often identified as relevant assertions for this process 
A) accuracy and valuation are often identified as relevant assertions for this process 
B) cutoff and valuation are often identified as relevant assertions for this process 
C) classification and valuation are often identified as relevant assertions for this process 
D) existence and valuation are often identified as relevant assertions for this process

The auditor uses substantive tests of balances in the inventory process to

The appropriate journal entry for the transactions involving the LIFO reserve and market value adjustments is determined by the particular situation in the firm.If LIFO inventory is greater than FIFO inventory,

When the auditor tests the inventory records,

The client may use a variety of methods to overstate inventory.These include

The transactions audited in the inventory process include

The lower-of-cost-or-market account is

The auditor uses substantive tests of balances to gather evidence for

The client may use a variety of methods to overstate inventory.These include

Because the most likely misstatement in the inventory process is an overstatement misstatement,

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

The auditor uses substantive tests of balances in the inventory process to

The appropriate journal entry for the transactions involving the LIFO reserve and market value adjustments is determined by the particular situation in the firm.If LIFO inventory is greater than FIFO inventory,

When the auditor tests the inventory records,

The client may use a variety of methods to overstate inventory.These include

The transactions audited in the inventory process include

The lower-of-cost-or-market account is

The auditor uses substantive tests of balances to gather evidence for

The client may use a variety of methods to overstate inventory.These include

Because the most likely misstatement in the inventory process is an overstatement misstatement,

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