Exam 21: Audit of the Inventory and Warehousing Cycle

If the auditor concludes that physical controls over inventory are so inadequate that the inventory will be difficult to count, the auditor should ordinarily:

Auditors test the quantity of materials charged to work-in-process by tracing these quantities to:

Which of the following would you normally characterize as a difficult and complex account to audit?

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

Controls which provide a means of ensuring that the physical counts are properly summarized, priced at the same amount as the unit records, correctly extended and totaled, and included in the general ledger at the proper amount are known as:

Tests of the perpetual inventory master files for the purpose of reducing the tests of physical inventory or changing their timing are done through the use of:

Explain why the audit of work-in-process and finished goods inventory is generally more complex than the audit of purchased inventory.

In valuing inventory, the auditor must consider all but which of the following factors?

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

In addition to performing analytical procedures that examine the relationship of inventory account balances with related financial statement accounts auditor's will often use non-financial measures in determining the reasonableness of inventory balances. List below at least two non-financial measures that may be useful to auditors.

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:

Given the following information about your audit client, perform analytical procedures and comment on your findings.

After accounting for a sequence of inventory tags, an auditor traces a sample of tags to the physical inventory listing to obtain evidence that all items:

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

In the audit of inventory, the auditor and client are jointly responsible for making and recording the count of physical inventory; while the auditor is responsible for drawing conclusions about the adequacy of the physical inventory.

The main difference between job order and process costing systems is that:

Which of the following control procedures would most likely be used to maintain accurate perpetual inventory records?

To assure proper segregation of duties, who should maintain the perpetual inventory master files?

The audit procedure "Perform tests of lower-of-cost-or-market, selling price, and obsolescence" provides assurance mainly for the realizable value objective for inventory pricing and compilation.

Production personnel should ordinarily be responsible for maintaining perpetual inventory records.