Inventories

Receipt of ordered materials by the receiving department will generate the completion of a form called the:

• bill of lading.

• receiving report.

• materials requisition.

• inventory acquisition summary.

The audit of ______ is often the most difficult and complex part of an audit.

• property, plant and equipment

• cash

• inventory

• prepaid insurance

Inventory is a complex area to audit for all but which of the following reasons?

• Inventory is often in different locations.

• There are several acceptable valuation methods and some entities use different methods for different types of inventory.

• Inventory is often the largest account in working capital.

• Inventory valuation includes few estimates.

When labor is a significant part of inventory, verifying the proper accounting of these costs should be tested in the:

• inventory and warehousing cycle.

• payroll and personnel cycle.

• acquisitions and payments cycle.cash cycle

• cash cycle

For retail and wholesale businesses, the most important inventory is

• merchandise available for sale.

• work-in-process.

• raw materials.

• inventory held on consignmen

The audit procedure “observe the client taking a physical inventory count and test the count” is sufficient to determine all of the following except:

• whether recorded inventory actually exists

• whether recorded inventory was properly valued by the client.

• whether recorded inventory was properly counted by the client.

• whether client inventory instruction had properly been followed.

In most manufacturing companies, the inventory and warehousing cycle begins with the:

• receipt of a customer’s order.

• completion of production of a customer’s order

• initiation of production of a customer’s order.

• acquisition of raw materials for production of an order

The audit tests to verify that the client is using an inventory method which is generally accepted and to verify that physical counts were correctly summarized are performed during the audit of the

• acquisition and payments cycle.

• payroll and personnel cycle.

• inventory and warehousing cycle

• sales and collection cycle.

Which of the following would be an appropriate initiation of a purchase requisition?

One initiated based on a periodic count of raw materials.

One initiateby stockroom personnel as raw materials are needed.

• Yes Yes

• No No

• Yes No

• No Yes

Almost all companies need physical controls over their assets to prevent loss. Which of the following is not an example of such a control?

• Perpetual inventory master files

• Segregated, limited-access storage areas

• Custody of assets assigned to specific responsible individuals.

• Approved prenumbered documents for authorizing movement of inventory