chapter 13/12

Transactions that occurred during the year.

For the audit of a continuing nonpublic client, the emphasis of the testing for property accounts is on:

Excessive recurring losses on assets retired.

The auditors may conclude that depreciation charges are insufficient by noting:

Cost Accounting Standards Board.

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

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

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

Preparation of a shipping document.

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

Utilization of serially numbered retirement work orders.

To assure accountability for fixed asset retirements, management should implement an internal control that includes:

Inspection of equipment and reconciliation with accounting records

To strengthen internal control over the custody of heavy mobile equipment, the client would most likely institute a policy requiring a periodic:

existence

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

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

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

Repairs.

Which of the following accounts should be reviewed by the auditors to gain reasonable assurance that additions to property, plant, and equipment are not understated?

All purchases of factory equipment are required to be made by the department in need of the equipment.

Which of the following is an internal control weakness related to factory equipment?

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

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

Test deductions from accumulated depreciation for assets purchased during the year.

Which of the following is not an overall test of the annual provision for depreciation expense?

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

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

yes yes yes

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

A property, plant, and equipment cutoff error near year-end has a more significant effect on net income.

Which of the following statements is not typical of property, plant, and equipment as compared to most current asset accounts?

Select items of equipment in the accounting records and then locate them in the plant.

An effective procedure for identifying unrecorded retirements of equipment is to:

Accumulated depreciation

Audit of which of the following accounts is most likely to reveal evidence relating to recorded retirements of equipment?

Well-kept records of perpetual inventory are maintained.

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:

Can issue an unqualified opinion without disclosing that she did not observe year-end inventories.

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 Mullins, CPA, observes such counts as she deems necessary and is able to satisfy herself as to the reliability of the client's procedures. In reporting on the results of her examination, Mullins:

Yes Yes

The audit of intangible assets typically involves

Uses a standard cost system that produces variance reports.

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

Existence of obsolete machinery

The auditors are most likely to seek information from the plant manager with respect to the

Bill of lading

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