Audit Procedures1. Select a sample of inventory items in the factory warehouse and trace each item to theinventory count sheets to determine whether it has been included and whether thequantity and description are correct.2. Trace selected quantities from the inventory list to the physical inventory to makesure that it exists and the quantities are the same.3. Compare the quantities on hand and unit prices on this year's inventory count sheetswith those in the preceding year as a test for large differences.4. Read the footnote disclosures related to the company's accounting policies for valu-ing inventory to make sure the information provided correctly reflects the methodused to value inventory.5. Test the extension of unit prices times quantity on the inventory list for a sample ofinventory items, test foot the list, and compare the total to the general ledger.that6. Send letters directly to third parties who hold the client's inventory, and requestthey respond directly to the auditors.17. Examine sales invoices and contracts with customers to determine whether anyinom goods are out on consignment with customers. Similarly, examine vendors' invoicesand contracts with vendors to determine whether any goods on the inventory listingare owned by vendors.8. Question operating personnel about the possibility of obsolete or slow-movinginventory.dGeneral Balance-Related Audit ObjectivesThe piClassificationCutoffDetail tie-inExistenceCompletenessAccuracyRealizable valueRights and obligations091569 101Presentationbseu 90 1183bsau9000 mortoma. Identify the type of audit evidence used for each audit procedure.b. Identify the general balance-related audit objective or objectives satisfied by each20 audit procedure.JISTCavaly 06-0THE 916 2910op basIsiontent to nousulsys.srh tovbuje odi yd noilemmigore nine situations, each containing two means of11

Physical examination of inventory items and documentation of inventory count sheets.Physical…

a. Identify the type of 220 b. Identify the general balance-related audit procedure. but edi yd noiten audit objective or objectives satisfied by Drenillo nousuk.75 1212000 bns ning situations, each containing two means of

a. Identify the type of 220 b. Identify the general balance-related audit procedure. but edi yd noiten audit objective or objectives satisfied by Drenillo nousuk.75 1212000 bns ning situations, each containing two means of

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter11: Auditing Inventory, Goods And Services, And Accounts Payable: The Acquisition And Payment Cycle

Section: Chapter Questions

Problem 31CYBK

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3) Which of the following audit procedures is a test of control? a. Management providing written instruction to all employees and supervising the monthly inventory stocktake. b. Observing employee compliance with stocktake procedures. c. Picking a sample of goods received notes and ensuring the correct date is recorded in the purchase’s ledger. d. Estimating total sales for a specific product line for the year and comparing actual sales.
Question 2: Following are audit procedures commonly per- formed in the inventory and warehousing cycle for a manufacturing company: 1. Read the client’s physical inventory instructions and observe whether they are being followed by those responsible for counting the inventory. 2. Use audit software to compute inventory turnover by major product line and com- pare it to turnover in the prior year. 3. Account for a sequence of inventory tags and trace each tag to the physical inventory to make sure it actually exists. 4. Compare the client’s count of physical inventory at an interim date with the per- petual inventory master file. 5. Trace the auditor’s test counts recorded in the audit files to the final inventory com- pilation and compare the tag number, description, and quantity. 6. Compare the unit price on the final inventory summary with vendors’ invoices. 7. Account for a sequence of raw material requisitions and examine each requisition for an authorized approval. 8. Trace the…
Question 2: Following are audit procedures commonly per- formed in the inventory and warehousing cycle for a manufacturing company: 1. Read the client’s physical inventory instructions and observe whether they are being followed by those responsible for counting the inventory. 2. Use audit software to compute inventory turnover by major product line and com- pare it to turnover in the prior year. 3. Account for a sequence of inventory tags and trace each tag to the physical inventory to make sure it actually exists. 4. Compare the client’s count of physical inventory at an interim date with the per- petual inventory master file. 5. Trace the auditor’s test counts recorded in the audit files to the final inventory com- pilation and compare the tag number, description, and quantity. 6. Compare the unit price on the final inventory summary with vendors’ invoices. 7. Account for a sequence of raw material requisitions and examine each requisition for an authorized approval. 8. Trace the…
The followings are 6 audit procedures that were performed in an audit of inventory. Compare the quantities on hand and unit prices on this year’s inventory count sheets with those in the preceding year as a test for large differences. Trail selected quantities from the inventory list to the physical inventory to make sure that it exists, and the quantities are the same. Test the extension of unit prices times quantity on the inventory list for a sample of inventory items, test foot the list, and compare the total to the general ledger. Send letters directly to third parties who hold the client’s inventory, and request that they respond directly to the auditors. Interview the operating personnel regarding the possibility of obsolete or slow-moving inventory. Examine sales invoices and contracts with customers to determine whether any goods are out on consignment with customers. Similarly, examine vendors’ invoices and contracts with vendors to determine whether any goods on the…
The auditor generally decides whether the inventory count can be taken before year-end primarily on the basis of: audit efficiency. accuracy of the perpetual inventory master files. client convenience. audit staff availability.
1. What is the primary reason we perform physical inventory observations? A. To obtain sufficient appropriate audit evidence over the existence and condition of inventory to meet the objectives of the professional auditing standards B. To obtain sufficient appropriate audit evidence that inventory is recorded at the correct cost on the financial statements C. To provide assurance over the time it takes inventory to leave the warehouse and arrive at the customer D. To verify assumptions used in management's estimates regarding inventory reserves 2. What piece of information gained during the understanding of the inventory process would be LEAST relevant to the scoping of inventory locations? A. The company hired a new count supervisor for one of their largest locations B. Book to physical adjustments were material in the prior year for 2 locations C. Cycle count accuracy rates have been greater than management's targets in the prior year and current year to date D. WIP inventory takes…
For each of the accounts balances and associated assertions below, select the audit procedure from the list provided that gives the most appropriate audit evidence for the account assertion. Accounts Balance Assertion Procedure Inventory Completeness a. Examine invoices from suppliers. b. Examine invoices paid after year-end and trace to subsidiary ledger. c. Select items located in the inventory warehouse and trace to the inventory listing. d. Trace sales invoices and shipping documents just after year-end to customer accounts. Cash Rights and obligations a. Agree bank statement to the subsidiary ledger. b. Agree the cash balance per the bank reconciliation to the year-end bank statement. c. Review the bank confirmation for information on compensating balances. d. Trace deposits per the bank statement to the cash subsidiary ledger. Accounts Receivable Existence a. Review confirmation of accounts receivable…
Following are audit procedures commonlyperformed in the inventory and warehousing cycle for a manufacturing company:1. Read the client’s physical inventory instructions and observe whether they are beingfollowed by those responsible for counting the inventory.2. Account for a sequence of inventory tags and trace each tag to the physical inventoryto make sure it actually exists.3. Compare the client’s count of physical inventory at an interim date with the perpetualinventory master file.4. Trace the auditor’s test counts recorded in the audit files to the final inventorycompilation and compare the tag number, description, and quantity.5. Compare the unit price on the final inventory summary with vendors’ invoices.6. Account for a sequence of raw material requisitions and examine each requisitionfor an authorized approval.7. Trace the recorded additions on the finished goods perpetual inventory master fileto the records for completed production.a. Identify whether each of the procedures…
A client maintains perpetual inventory records in quantities and in dollars. If the assessed control risk is high, an auditor would probablya. Apply gross profit tests to ascertain the reasonableness of the physical counts.b. Increase the extent of tests of controls relevant to the inventory cycle.c. Request the client to schedule the physical inventory count at the end of the year.d. Insist that the client perform physical counts of inventory items several times during the year.
The tests of controls for inventory records would include the following procedures.A. Existence.B. Rights.C. Completeness.D. Valuation.E. Presentation and disclosure.For each of the procedures, choose the letter of the correct PCAOB assertion(s). Only one letter per procedure should be used._______ 1. Trace a sample of sales invoices to perpetual inventory record entry of issue._______ 2. Select a sample of inventory item from perpetual records and vouch additions to receiving reports._______ 3. Select a sample of shipping documents and review the accounting summary of the quantities and prices._______ 4. Trace posting of sample of sales invoices to amounts in general ledger._______ 5. Review the appropriateness of standard costs to price inventory issues and cost of goods sold
Tracing the Inventory Count. You have been assigned to trace the results of the observation of Brightware China’s physical inventory count to its pricing and compilation. You note the following conditions.1. The last inventory tag documented by Mark Hulse, the auditor who observed the inventory, was 1732, but you notice a number of items with count ticket numbers higher than 1732. You contact the client’s controller, Marcia Vines, who tells you the client found a storage room full of a new product that Brightware had just produced and added it to the inventory. 2. The count tickets recorded by Hulse agree to the inventory list, but some of the other count tickets you select are substantially different from it. Vines tells you these are input errors and she will have them corrected. 3. Hulse described several boxes of goods as being dusty and even broken. They are included in the inventory at cost. Vines’s explanation is that china never “goes bad” and the goods themselves were not…
When auditing merchandise inventory at year-end, the auditor performs audit procedures to obtain evidence that no goods held on consignment are included in the client’s ending inventory balance. This audit procedure provides assurance about which management assertion Select one: a. Existence b. Valuation and allocation c. Completeness d. Occurrence e. Rights and obligations