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Exam 9: Production Cycle 394

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Question 41

Multiple Choice

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From the auditors' point of view, inventory counts are more acceptable prior to the year end when

A) internal control is weak.
B) accurate perpetual inventory records are maintained.
C) inventory is slow moving.
D) significant amounts of inventory are held on a consignment basis.

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Question 42

Multiple Choice

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An auditor would vouch inventory on the inventory status report to the vendor's invoice to obtain evidence concerning management's balance assertions about

A) existence.
B) rights and obligations.
C) completeness.
D) valuation.

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Question 43

Short Answer

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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.

A sample from the perpetual inventory records meets the _______ requirement to determine whether all recorded transactions are supported by reports and documents.

_______ are used by the purchasing department to place orders for materials.

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?

A material error or fraud in inventory typically has a _______ on financial statements.

An auditor selected an inventory item on the warehouse floor, test counted it, and traced the count to the final inventory compilation. The auditor most likely was testing the PCAOB assertion of

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?

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

A production order usually includes a _______.

The function of _______ refers to comparing the physical count of inventory to the perpetual inventory records.

Audit planning requires that the auditor consider possible inventory errors or frauds that might occur that could affect the financial statements. For each of the types of inventory errors listed in the following table, indicate what would be the possible effect in the inventory and cost of sales accounts: overstated, understated, or no effect.

Prepare an audit plan for inventory pricing and compilation.

Which cycle is not directly linked to the production cycle?

The typical functions of the production and conversion includes

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

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

Counting different parts of inventory at different times of the year is called

A client's physical count of inventories was higher than the inventory quantities shown in the perpetual records. This situation could be the result of the failure to record