audit ch.13

That purchase or production activities could occur that may lead to excess levels of certain types of finished goods is the auditor's concern with Blank______ in the inventory system. Multiple choice question. authorization occurrence accuracy completeness

authorization

Failure to record inventory in the proper period can result in misstatements on the Blank______. Multiple choice question. income statement only balance sheet and income statement balance sheet only statement of cash flows only

balance sheet and income statement

ccuracy is an important assertion because inventory transactions that are not properly recorded result in misstatements that directly affect Blank______. Multiple choice question. cost of goods sold only both cost of goods sold and inventory all financial statement accounts inventory only

both cost of goods sold and inventory

Control activities to ensure that inventory is properly recorded as raw materials, work in process, or finished goods are important for the Blank______ assertion. Multiple choice question. cutoff classification presentation occurrence

classification

In most manufacturing companies, determining which manufacturing processing department has control of the inventory on the date of the physical count achieves proper Blank______. Multiple choice question. classification disclosure cutoff valuation

classification

There may be problems with the proper valuation of inventory in terms of lower-of-cost-or-market values if industry Blank______ is intense. Multiple choice question. risk timing analysis competition

competition

The auditor should document the achieved level of control risk for the inventory management process using Blank______. Multiple choice question. both quantitative amounts and qualitative terms qualitative terms only quantitative amounts only either quantitative amounts or qualitative terms

either quantitative amounts or qualitative terms

True or false: In most manufacturing companies, proper valuation can be achieved by determining which manufacturing processing department has control of the inventory on the date of the physical count. True false question.

false

The cycle for inventory begins when goods are purchased and stored and ends when the Blank______. Multiple choice question. finished goods are stored in the warehouse finished goods are shipped to customers work in process is complete raw materials have been purchased and inventory

finished goods are shipped to customers

Audit research has shown there is a relatively Blank______ risk that inventory contains material misstatements. Multiple choice question. high low

high

The production schedule provides the auditor Blank______. Multiple choice question. the exact level of inventory at all times knowledge of stock outs details on the control activities in the production process information on the planned level of operating activity

information on the planned level of operating activity

The auditor may accept the inventory account as fairly presented if the likely misstatement is Blank______ the tolerable misstatement. Multiple choice question. greater than or equal to less than or equal to less than greater than

less than

Valuing inventory as part of an audit Blank______. Multiple choice question. may result in disagreements with the entity is straightforward depends on the auditor's knowledge of the industry

may result in disagreements with the entity

With respect to the Blank______ assertion, the auditor should also be concerned that goods may be stolen. Multiple choice question. accuracy occurrence authorization completeness

occurrence

Excess levels of finished goods can become obsolete, which can result in ending inventory being Blank______. Multiple choice question. overstated understated

overstated

If items are recorded as sold in the incorrect period, revenue, cost of goods sold, and receivables will be Blank______ and inventory will be Blank______ for that period. Multiple choice question. overstated, understated understated, overstated overstated, correctly stated correctly stated, understated

overstated, understated

Auditors' tests of controls around management's use of a chart of accounts, proper codes for recording inventory transactions, and the financial reporting process, including the use of a disclosure checklist, should provide adequate assurance for the Blank______ assertion. Multiple choice question. presentation completeness classification accuracy

presentation

The major control activity for preventing fictitious inventory transactions from being recorded is Blank______. Multiple choice question. preparation and review of authorized purchase or production schedules periodic or annual comparison of goods on hand with amounts shown in perpetual inventory records physical safeguards over inventory proper segregation of duties

proper segregation of duties

When internal controls are deemed to be adequate, the auditor will generally follow a Blank______ strategy for auditing inventory and cost of goods sold. Multiple choice question. substantive reliance

reliance

The raw materials store function is responsible for Blank______. Multiple choice question. preparing materials requisitions safeguarding the assets recording pilferage of inventory authorizing receiving reports

safeguarding the assets

Because of the potential for theft and fraud, Blank______ is a particularly important control in the inventory management process. Multiple choice question. issuance of materials requisitions updating of inventory records segregation of duties approval of purchase requisitions

segregation of duties

In order to set the control risk for the inventory management process, the auditor will need a thorough understanding of the process used by the entity to Blank______. Multiple choice question. handle inventory returns manufacture goods prepare purchase requisitions value inventory

value inventory

True or false: Observing that count teams have placed count tags on all inventory items provides evidence regarding the cutoff assertion. True false question.TrueFalse

False