Chapter 12
T/F: The examination of warehouse receipts is sufficient verification of a material amount of goods stored in public warehouses.
False
T/F: The lower-of-cost-or-market test by the auditors is generally designed to assure that inventories are valued at or above their net realizable values.
False
T/F: When the auditors cannot satisfy themselves as to the accuracy of ending inventory and a material misstatement may exist, they normally may still give an unmodified (unqualified) opinion on the client's income statement.
False
T/F: The use of a tagging system for inventory taking is designed to prevent double counting of goods.
True
T/F: To test the client's cutoff of inventories, the auditors will make a record of the serial number of the final receiving and shipping documents used prior to the taking of the physical inventory.
True
T/F: Auditors should *not* review the client's planning of the physical inventory.
False
A client uses a perpetual inventory system. Would one expect a credit to which of the following accounts at the point of sale? Sales (1st) Inventory (2n) A.Yes Yes B.Yes No C.No Yes D.No No
Option A
A client uses a periodic inventory system. Would one expect a credit to which of the following accounts at the point of sale? Sales (1st) Inventory (2n) A.Yes Yes B.Yes No C.No Yes D.No No
Option B
To measure how effectively a client employs its assets, an auditor calculates inventory turnover by dividing the average inventory into: a) Net sales. b) Cost of goods sold. c) Operating income. d) Gross sales.
b) Cost of goods sold.
Which of the following is *not* true relating to the auditors' observation of the client's physical inventory? a) The auditors should evaluate the client's planning of the physical inventory. b)The auditors should supervise the taking of the inventory. c)The auditors should evaluate the adequacy of the client's counting procedures. d) The auditors should take test counts of the client's inventory.
b)The auditors should supervise the taking of the inventory.