Chapter 12 - Practice Quiz Questions
Which of the following is not one of the independent auditor's objectives regarding the examination of inventories
Verifying that all inventory owned by the client is on hand at the time of the count
Which of the following best describes the reason for the auditors' review of the client's cost accountign system?
to obtain evidence about the valuation of wIP, finished goods, and COGS
Which of the following is lest likely to be accurate statement concerning characteristics of an audit
An analysis of inventory turnover addresses whether the proper method of determining inventory costs - as contrasted to market values - is being applied
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 in to the inventory summary sheets. Which assertion does this procedure relate to most directly?
Completeness
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
Corresponding with the state agency regarding the authenticity of the public warehouse
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
Sales
The auditors will usually trace the details of the test counts made during the observation of the physical inventory taking to a final inventory schedule. This audit procedure is undertaken to provide evidence that items physically present and observed by the auditors at the time of the physical inventory count are
Included in the final inventory schedule
Which of the following is true about the auditors' observation of the client's physical inventory?
The auditors' observation addresses the existence assertion
Effective internal control for purchases generally can be achieved in a well-planned organizational structure with a separate purchasing department that has
The authority to make purchases of requisitioned materials and services
Which of the following is not a reason for the special significance attached by the auditors to the verification of inventories
The existence of inventories is inherently difficult to substantiate
The most reliable procedure for an auditor to use to test the existence of a client's inventory at an outside location would be to
observe physical counts of the inventory items
To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditors should review and test the
purchase cutoff procedures
An auditor suspects that certain client employees are ordering merchandise for themselves over the internet without recording the purchase or receipt of the merchandise. When vendors' invoices arrive, one of the employees approves the invoices for payment. After the invoices are paid, the employee destroys the invoices and related vouchers. In gathering evidence regarding the fraud, the auditor most likely would select items for testing from the file of all
cash disbursements
Purchase cutoff procedures should be designed to test that merchandise is included in the inventory of the client company, if the company
holds legal title to the merchandise
Which of the following is an auditor least likely to consider a departure from generally accepted accounting principles
including in inventory items that are consigned out to vendors but not yet sold