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