Auditing Chapter 12

The receiving department is LEAST likely to be responsible for the:

Preparation of the shipping document

The document issued by a common carrier acknowledging the receipt of goods and setting forth the provisions of the transportation agreement is the:

Bill of lading

An auditor most likely would make inquiries of production and sales personnel concerning possible obsolete inventory to address:

Valuation

During the inventory count an auditor selects items and determines that the proper description and quantity were recorded by the client. This procedure is most closely related to:

Completeness

Which of the following should be included as a part of inventory costs of a manufacturing company?

Direct Labor(yes), Raw Material(yes), Factory Overhead(yes)

Which of the following is least likely to be among the auditors' objectives in the audit of inventories and cost of good sold?

Establish that the client includes only inventory on hand at year-end in inventory totals

An auditor selects items from the client's inventory listing and identifies the items in the warehouse. This procedure is most likely related to :

Existence

When a primary risk related to an audit is possible overstated inventory, the assertion most directly related is:

Existence

Which of the following is the best audit procedure for the discovery of the damaged merchandise in a client 's ending inventory

Observe marchandise and raw materials during the client's physical inventory taking

The primary objectives of a CPA's observation of a client's physical inventory count is to:

Obtain direct knowlegde that the inventory exists and has been properly counted

The auditor's analytical procedures will be facilitated if the client:

Uses a standard cost system that produces variance reports

An auditor concluded that no excessive costs for an idle plant were charged to inventory. This conclusion is most likely related to presentation and disclosure and:

Valuation

When perpetual inventory records are maintained in quantities and in dollars, and internal control over inventory is weak, the auditor would probably:

Want the client to schedule the physical count at the end of the year

Instead of taking a physical inventory count on the balance-sheet date, the client may take physical counts prior to the year-end if internal control is adequate and:

Well-kept records of perpetual inventory are maintained

McPherson Corp does not make an annual physical count of year-end inventories, but instead makes weekly test counts on the basis of a statistical plan. During the year, Sara Mullin, CPA, observes such counts as the deems necessary and is able to satisfy herself as to the reliability of the client

can issue an unqualified opinion disclosing that she did not observe year-end inventories.

An auditor most likely would analyze inventory turnover rates to obtain evidence about:

Valuation

The organization established by Congress to narrow the options in cost accounting that are available under generally accepted accounting principles is the:

Cost Accounting Standard Board