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Exam 9: Production Cycle

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Question 21

Multiple Choice

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

A) Rights and obligations.
B) Completeness.
C) Existence.
D) Accuracy and valuation.

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Question 22

Multiple Choice

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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?

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.

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Question 23

Multiple Choice

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A company's cost accountant periodically reconciles job cost sheets to the work-in-process inventory accounts.This reconciliation is most likely performed to provide assurance that

Counting inventory on the warehouse floor and tracing the count to the inventory compilation provides evidence to support which management (PCAOB) assertion?

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,choose the letter of the correct ASB balance assertion(s).Only one letter per procedure should be used. ----- $\quad$ 1. Test counted inventory and traced the count to the perpetual inventory record. ----- $\quad$ 2. Selected a sample of inventory items from the perpetual records and vouch additions to receiving reports. ----- $\quad$ 3. Reviewed a sample of vendor invoices for prices paid for inventory. ----- $\quad$ 4. Review inventory footnote for the financial statements. ----- $\quad$ 5. Reviewed vendor invoices and purchase orders for terms of the contract.

Which cycle is not directly linked to the production cycle?

If overhead is miscalculated so that it is underabsorbed,the result if the error is not corrected will be that

An inventory trial balance can be used to scan for __________________________________ and as a population for sample selection for the ______________________________________. Reference: Question also found in study guide

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?

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

An auditor selected an invoice for a large inventory purchase and vouched the invoice to the receiving report.Which ASB transaction assertion is the auditor most likely testing?

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

If an auditor was not present at a new client's inventory count,the auditor should require the client to perform another inventory count.

Selecting inventory from locations on the warehouse floor,obtaining a test count,and tracing the count to the final inventory compilation produces evidence for the _____________________________ ASB balance assertion. Reference: Question also found in study guide

The function of _________________________________ refers to comparing the physical count of inventory to the perpetual inventory records. Reference: Question also found in study guide

The overall production starts with production planning,which usually is based on a _______________________________________. Reference: Question also found in study guide

At the beginning of the observation of the inventory count,the auditor records the last bill of lading used by the company to

To test the control assertion of completeness in the area of work-in-process inventory,the auditor most likely would

Which of the following is an internal control weakness for a company whose inventory of supplies consists of a large number of individual items?

_____________________________ can be used in connection with knowledge of the shape of management's plans for the year under audit. Reference: Question also found in study guide