Audit Ch. 12

T/F A client uses a perpetual inventory system. Would one expect a credit to only the sales account at point of sale?

false; sales and inventory

Purchase cutoff procedures should be designed to test that merchandise is included in the inventory of the client company, if the company: - Has paid for the merchandise. - Holds the shipping documents for the merchandise issued in the company's name. - Holds legal title to the merchandise. - Has physical possession of the merchandise.

holds legal title to the merchandise

Which of the following is least likely to be performed efficiently using data analytics? - Identification of defective inventory items. - Identification of purchases recorded more than once. - Identification of overvalued inventory items based on sales of those items. - Identification of slow-moving inventory items.

identification of defective inventory items

Which of the following is not a procedure that typically is used by the auditors in their examination of a client's goods held in the custody of a public warehouse? - Confirmation. - Obtaining reports on internal control at the warehouse. - Communicate with the regulatory agency about the legitimacy of the public warehouse. - Observation.

communicate with the regulatory agency about the legitimacy of the public warehouse

An auditor has accounted for a sequence of inventory tags and is now going to trace information on a representative number of tags to the inventory summary sheets. Which assertion does this procedure - Completeness. - Valuation. - Legality. - Existence.

completeness

A receiving department compares inventory items received with copies of purchase orders. The purchase orders list the name of the vendor and do not list the quantities of the material ordered. Using the purchase orders, the receiving department is most likely to detect: - Deliveries of a greater quantity of items than those ordered. - Partial deliveries. - Deliveries for which no purchase order was issued. - Unapproved sales orders.

deliveries for which no purchase order was issued

Which of the following is not true relating to the auditors' observation of the client's physical inventory? - The auditors should supervise the taking of the inventory. - The auditors should evaluate the adequacy of the client's counting procedures. - The auditors should take test counts of the client's inventory. - The auditors should evaluate the client's planning of the physical inventory.

the auditors should supervise the taking of the inventory

Which of the following is true about the auditors' observation of the client's physical inventory? - The auditors should justify any omission of the observation in the audit report. - The auditors' observation addresses the existence assertion. - The count must be made at year-end. - The auditors should supervise the client's personnel.

the auditors' observation addresses the existence assertion

Which of the following is not a reason for the special significance attached by the auditors to the verification of inventories? - Special valuation problems often exist for inventories. - The existence of inventories is inherently difficult to substantiate. - The determination of inventory valuation directly affects net income. - Inventories are often the largest current asset of an enterprise.

the existence of inventories is inherently difficult to substantiate

To assure that all purchases are authorized before payment is made, accounting department personnel should match the vendor's invoice to: - The purchase order. - The voucher. - The purchase requisition. - The receiving report.

the purchase order

In auditing a manufacturing entity, which of the following procedures would an auditor least likely perform to determine whether slow-moving, defective, and obsolete items included in inventory are properly identified? - Compare inventory balances to anticipated sales volume. - Review inventory experience and trends. - Examine inventory items for dust or rust during observation. - Trace tag counts to final inventory listing.

trace tag counts to final inventory listing

T/F A client uses a periodic inventory system. Would one expect a credit to only the sales account at point of sale?

true

An auditor performs a test to determine whether all merchandise for which the client was billed was received. The population for this test consists of all: - Receiving reports. - Merchandise received. - Vendor's invoices. - Canceled checks.

vendor's invoices

Which of the following is an auditor least likely to consider a departure from U.S. generally accepted accounting principles? - Valuing inventory at cost. - Including in inventory items that are consigned out to vendors, but not yet sold. - Including in inventory items shipped subsequent to year-end, but for which valid orders did exist at year-end. - Using standard cost as the measure of inventory cost.

including in inventory items that are consigned out to vendors, but not yet sold

Purchase cutoff procedures should be designed to test whether all inventory: - Owned by the company was recorded. - On the year-end balance sheet was paid for by the company. - On the year-end balance sheet was carried at lower-of-cost-or-market. - Owned by the company is in the possession of the company.

owned by the company was recorded

To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditors should review and test the: - Terms of the open purchase orders. - Purchase cutoff procedures. - Purchase invoices received on or around year-end. - Contractual commitments made by the purchasing department.

purchase cutoff procedures

A client's physical count of inventories was higher than the inventory quantities per the perpetual records. This situation could be the result of the failure to record: - Sales discounts. - Sales. - Purchases. - Purchase returns.

purhases

The client's physical count of inventories is lower than the inventory quantities in the perpetual records. This could be the result of a failure to record: - Purchase discounts. - Sales discounts. - Purchases. - Sales.

sales

Which one of the following procedures would not be appropriate for the auditors in discharging their responsibilities concerning the client's physical inventories? - Confirmation of goods in the hands of public warehouses. - Obtaining written representation from the client as to the existence, quality, and dollar amount of the inventory. - Carrying out physical inventory procedures at an interim date. - Supervising the taking of the annual physical inventory.

supervising the taking of the annual physical inventory

Which statement is correct relating to the count of inventory when a company that specializes in taking such counts ("the company") is involved with counting a client's inventory? - The auditor must observe all inventory counts taken by the company. - The auditor should observe a letter of representations form the company. - The auditor should not consider the counts by the company, by themselves, sufficient appropriate audit evidence. - The auditor should consider the company a specialist, and follow the procedures outlined for addressing an auditor's specialist.

the auditor should not consider the counts by the company, by themselves, sufficient appropriate audit evidence

Which of the following is true about the auditors' observation of the client's physical inventory? - The auditors should evaluate the condition of the inventory. - The auditors should segregate damaged and obsolete goods. - The auditors should plan the physical inventory. - The auditors should supervise the client's personnel.

the auditors should evaluate the condition of the inventory

Which of the following is not one of the independent auditor's objectives regarding the examination of inventories? - Verifying that inventory counted is owned by the client. - Ascertaining the physical quantities of inventory on hand. - Verifying that all inventory owned by the client is on hand at the time of the count. - Verifying that the client has used proper inventory pricing.

verifying that all inventory owned by the client is on hand at the time of the count