Question 1

Auditors record the last bill of lading used at the time of the inventory count to

Accepted Answer

A)   search for unrecorded sales.
B)   test cutoff.
C)   verify ownership.
D)   all of the above.

Question 2

Your client plans to count inventory at several locations on the same day.No location is material in amount,but the total of inventory is quite material.How is an auditor likely to plan to observe?

Accepted Answer

A)   Observe all counts at all locations by using the required number of auditors.
B)   Insist the inventory be counted on separate days so the auditor can be present at all locations.
C)   Work with the client to determine which locations to observe.
D)   Observe a sample of locations on a surprise basis.

Question 3

When a production plan is complete the production planner needs to determine

Accepted Answer

A)   what raw materials need to be ordered.
B)   labor rates for the jobs are needed to produce the orders.
C)   which vendors need to supply raw materials.
D)   what equipment needs to be purchased to meet production quotas.

Question 4

A comparison of the prior year's sales forecast with actual sales may provide an indication of slow moving inventory.

Accepted Answer

A) True 
 B)False

Question 5

An inventory roll back is required when inventory is counted prior to the end of the year.

Accepted Answer

A) True 
 B)False

Question 6

Match the examples of specific control assertions in the production cycle with the ASB transaction assertions.

Accepted Answer

The answer of Match the examples of specific control assertions...

Question 7

Inventory count tags are controlled

Accepted Answer

A)   to prevent counting errors.
B)   to test cutoff.
C)   to prevent subsequent addition of goods to the inventory.
D)   for all of the above reasons.

Question 8

The cost accounting department at Blue Manufacturing Company receives various types of information at the end of each week.The production floor reports time and production work data directly to the cost accounting department.Also,the payroll department sends labor cost data to the cost accounting department.What is the cost accounting department likely to do with this information? Why?

Accepted Answer

In this situation,the cost accounting de...

Question 9

Your client counts inventory three months before the end of the fiscal year.Internal controls over inventory are excellent.Which procedure is not necessary for the inventory roll-forward?

Accepted Answer

A)   Check that shipping documents for the last three months agree with perpetual records.
B)   Tracing receiving reports for the last three months to perpetual records.
C)   Compare gross margin percentages for the last three months.
D)   Request the client to recount inventory at the end of the year.

Question 10

An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management's financial statement (PCAOB) assertion of

Accepted Answer

A)   valuation or allocation.
B)   rights and obligations.
C)   existence or occurrence.
D)   presentation and disclosure.

Question 11

Which of the following auditing procedures probably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?

Accepted Answer

A)   Trace test counts noted during the entity's physical count to the entity's summarization of quantities.
B)   Inspect agreements to determine whether any inventory is pledged as collateral or subject to any liens.
C)   Select the last few shipping documents used before the physical count and determine whether the shipments were recorded as sales.
D)   Inspect the open purchase order file for significant commitments that should be considered for disclosure.

Question 12

To determine the client's planned amount and timing of production of a product,the auditor will review the

Accepted Answer

A)   sales forecast.
B)   inventory reports.
C)   production plan.
D)   purchases journal.

Question 13

Which cycle is not directly linked to the production cycle?

Accepted Answer

A)   Acquisition and expenditure cycle.
B)   Payroll cycle.
C)   Revenue and collection cycle.
D)   Finance and investment cycle.

Question 14

Generally accepted accounting principles (GAAP) require that inventory be recorded at

Accepted Answer

A)   the lower of cost or fair market value.
B)   the lower of cost or net realizable value.
C)   the higher of cost or net realizable value less a normal profit (floor) .
D)   none of the above.

Question 15

Production reports of finished units should be signed by the __________________________________ and finished goods inventory custodian and forwarded to _______________________________.
Question also found in study guide

Accepted Answer

production...

Question 16

Maple Company has an increase in purchases from specific vendors and an increase in raw materials inventory for the items purchased from these vendors.Sales for the company have not increased and are not forecast to increase.From this information an auditor might suspect

Accepted Answer

A)   an increase in obsolete raw material inventory.
B)   theft of raw material inventory.
C)   kickbacks from vendors.
D)   poor security over raw material inventory.

Question 17

An auditor selected a product maintained in the finished goods warehouse.The auditor counted the product and compared this amount with the amount in the finished goods perpetual inventory subsidiary account.Which ASB balance assertion is the auditor most likely testing?

Accepted Answer

A)   Existence
B)   Completeness
C)   Rights and obligations
D)   Valuation

Question 18

Inventory observation must be observed if inventory is one of the major assets listed on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 19

The tests of controls for inventory records would include the following procedures.
A. Existence.
B. Rights and obligations.
C. Completeness.
D. Accuracy and valuations.
E. Presentation and disclosure.
For each of the procedures, place the letter of the correct ASB balance assertion(s). Only one letter per procedure should be used.

Accepted Answer

1.C; 2.A; ...

Question 20

An auditor is examining a nonpublic company's inventory procurement system and has decided to perform tests of controls.Under which of the following conditions should the auditor perform tests of controls?

Accepted Answer

A)   Significant weaknesses were found in the company's internal control.
B)   The auditor hopes to reduce the amount of work to be done in assessing inherent risk.
C)   The auditor believes that testing the controls could lead to a reduction in overall audit time and cost.
D)   Tests of controls are always performed when the auditor begins to assess control risk.

Exam 9: Production Cycle

Match the examples of specific control assertions in the production cycle with the ASB transaction assertions.

Correct Answer
verified

Inventory observation must be observed if inventory is one of the major assets listed on the balance sheet.

Correct Answer
verified

Maple Company has an increase in purchases from specific vendors and an increase in raw materials inventory for the items purchased from these vendors.Sales for the company have not increased and are not forecast to increase.From this information an auditor might suspect

Correct Answer
verified

To determine the client's planned amount and timing of production of a product,the auditor will review the

Correct Answer
verified

Which cycle is not directly linked to the production cycle?

Correct Answer
verified

Correct Answer
verified
In this situation,the cost accounting de...
View Answer

Generally accepted accounting principles (GAAP) require that inventory be recorded at

Correct Answer
verified

A comparison of the prior year's sales forecast with actual sales may provide an indication of slow moving inventory.

Correct Answer
verified

Correct Answer
verified
1.C; 2.A; ...
View Answer

An auditor selected a product maintained in the finished goods warehouse.The auditor counted the product and compared this amount with the amount in the finished goods perpetual inventory subsidiary account.Which ASB balance assertion is the auditor most likely testing?

Correct Answer
verified

An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management's financial statement (PCAOB) assertion of

Correct Answer
verified

An inventory roll back is required when inventory is counted prior to the end of the year.

Correct Answer
verified

Inventory count tags are controlled

Correct Answer
verified

Your client counts inventory three months before the end of the fiscal year.Internal controls over inventory are excellent.Which procedure is not necessary for the inventory roll-forward?

Correct Answer
verified

An auditor is examining a nonpublic company's inventory procurement system and has decided to perform tests of controls.Under which of the following conditions should the auditor perform tests of controls?

Correct Answer
verified

When a production plan is complete the production planner needs to determine

Correct Answer
verified

Auditors record the last bill of lading used at the time of the inventory count to

Correct Answer
verified

Which of the following auditing procedures probably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?

Correct Answer
verified

Your client plans to count inventory at several locations on the same day.No location is material in amount,but the total of inventory is quite material.How is an auditor likely to plan to observe?

Correct Answer
verified

Production reports of finished units should be signed by the ____ and finished goods inventory custodian and forwarded to _. Question also found in study guide

Correct Answer
verified
production...
View Answer

Exam 9: Production Cycle

Match the examples of specific control assertions in the production cycle with the ASB transaction assertions.

Correct AnswerverifiedShow Answer

Inventory observation must be observed if inventory is one of the major assets listed on the balance sheet.

Correct AnswerverifiedShow Answer

Maple Company has an increase in purchases from specific vendors and an increase in raw materials inventory for the items purchased from these vendors.Sales for the company have not increased and are not forecast to increase.From this information an auditor might suspect

Correct AnswerverifiedShow Answer

To determine the client's planned amount and timing of production of a product,the auditor will review the

Correct AnswerverifiedShow Answer

Which cycle is not directly linked to the production cycle?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn this situation,the cost accounting de...View AnswerShow Answer

Generally accepted accounting principles (GAAP) require that inventory be recorded at

Correct AnswerverifiedShow Answer

A comparison of the prior year's sales forecast with actual sales may provide an indication of slow moving inventory.

Correct AnswerverifiedShow Answer

Correct Answerverified1.C; 2.A; ...View AnswerShow Answer

An auditor selected a product maintained in the finished goods warehouse.The auditor counted the product and compared this amount with the amount in the finished goods perpetual inventory subsidiary account.Which ASB balance assertion is the auditor most likely testing?

Correct AnswerverifiedShow Answer

An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete or slow-moving inventory to support management's financial statement (PCAOB) assertion of

Correct AnswerverifiedShow Answer

An inventory roll back is required when inventory is counted prior to the end of the year.

Correct AnswerverifiedShow Answer

Inventory count tags are controlled

Correct AnswerverifiedShow Answer

Your client counts inventory three months before the end of the fiscal year.Internal controls over inventory are excellent.Which procedure is not necessary for the inventory roll-forward?

Correct AnswerverifiedShow Answer

An auditor is examining a nonpublic company's inventory procurement system and has decided to perform tests of controls.Under which of the following conditions should the auditor perform tests of controls?

Correct AnswerverifiedShow Answer

When a production plan is complete the production planner needs to determine

Correct AnswerverifiedShow Answer

Auditors record the last bill of lading used at the time of the inventory count to

Correct AnswerverifiedShow Answer

Which of the following auditing procedures probably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?

Correct AnswerverifiedShow Answer

Your client plans to count inventory at several locations on the same day.No location is material in amount,but the total of inventory is quite material.How is an auditor likely to plan to observe?

Correct AnswerverifiedShow Answer

Production reports of finished units should be signed by the __________________________________ and finished goods inventory custodian and forwarded to _______________________________. Question also found in study guide

Correct Answerverifiedproduction...View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
In this situation,the cost accounting de...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified
1.C; 2.A; ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Production reports of finished units should be signed by the ____ and finished goods inventory custodian and forwarded to _. Question also found in study guide

Correct Answer
verified
production...
View Answer