ACC 364 Chapter 11 Review

The existence and presentation/disclosure assertions are usually the most relevant for inventory.

• True

• False

The most common concerns for inventory is that ending inventory is overstated and COGS is understated.

• True

• False

Inherent risks for inventory include a high volume of activity and various valuation alternatives.

• True

• False

Which is a common inherent risk for accounts payable and related expenses?

• Management preference to record assets as expenses.

• Ending inventory valued according to various valuation methods.

• AP valuation difficulty due to the lower of cost or market requirement.

• Management preference to understate AP to meet certain current ratio level.

Which control is related to the payment of AP?

• Cycle counts.

• A disclosure committee.

• A three-way match.

• Cycle counts and a three-way match.

Inventory growing at a rate greater than sales might indicate higher fraud risk.

• True

• False

Cutoff tests and physical inventory counts are appropriate tests of existence for inventory.

• True

• False

Reviewing vendor invoices to determine proper title is conveyed is an appropriate test of rights for inventory.

• True

• False

Which is an appropriate test for inventory valuation?

• Inquiry of the existence of obsolete inventory.

• Inquiry of sales adjustments/mark downs offered to promote product sales.

• Review of trade journals for changes in product technology.

• All are appropriate tests of valuation of inventory.

To test completeness controls for AP, an auditor could trace receiving reports to the GL.

• True

• False