cpa audit review ch 12 review 4

Card Set Information

Author:
Joens1313
ID:
283317
Filename:
cpa audit review ch 12 review 4
Updated:
2014-09-17 00:08:51
Tags:
cpa audit review 12
Folders:

Description:
cpa audit review ch 12 review 4
Show Answers:

Home > Flashcards > Print Preview

The flashcards below were created by user Joens1313 on FreezingBlue Flashcards. What would you like to do?


  1. The Smith Corporation uses prenumbered receiving reports that are released in numerical order from a locked box. For 2 days before the physical count all receiving reports are stamped “before inventory,” and for 2 days after the physical count all receiving reports are stamped “after inventory.” The receiving department continues to receive goods after the cutoff time while the physical count is in process. The least effective method for checking the accuracy of the cutoff is to

    A.Observe that the receiving clerk is stamping the receiving reports properly.

    B.List the number of the last receiving report for items included in the physical inventory count.

    C.Test trace receiving reports issued after the last receiving report to the physical items to see that they have not been included in the physical count.

    D.Test trace receiving reports issued before the last receiving report to the physical items to see that they have been included in the physical count.
    A.Observe that the receiving clerk is stamping the receiving reports properly.

    The least effective method of checking the accuracy of the cutoff of inventory is to observe that the receiving clerk is stamping the receiving reports properly. The auditor is primarily concerned with the dates on the receiving reports to verify that goods received or shipped near year end are accounted for in the proper reporting period.
  2. Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?

    A.Inventory is properly valued.

    B.Inventory is properly presented in the financial statements.

    C.The entity has rights to the inventory.

    D.Inventory is complete.
    D.Inventory is complete.

    The completeness assertion about account balances at the end of a period is that all assets, liabilities, and equity interests that should have been recorded have been recorded. The completeness assertion for inventory is to determine whether the balance contains inventory (1) on hand and (2) owned by the entity that is in transit or stored at outside locations.
  3. Which of the following procedures would be most appropriate for testing the completeness assertion as it applies to inventory?

    A.Performing cutoff procedures for shipping and receiving.

    B.Examining paid vendor invoices.

    C.Tracing inventory items from the tag listing back to the physical inventory quantities.

    D.Scanning perpetual inventory, production, and purchasing records.
    A.Performing cutoff procedures for shipping and receiving.

    Testing the cutoff to consider the transfer of title of inventory in shipping and receiving is appropriate for testing the completeness assertion. The terms, FOB shipping point versus FOB destination, should be evaluated to assure that the goods were recorded in the proper period.
  4. Which of the following procedures would an auditor most likely perform to obtain assurance that slow-moving and obsolete items included in inventories are properly identified?

    A.Tracing inventory observation test counts to perpetual listings.

    B.Examining an analysis of inventory turnover.

    C.Testing shipping and receiving cutoff procedures.

    D.Confirming inventories at locations outside the entity’s premises.
    B.Examining an analysis of inventory turnover.

    Calculating inventory turnover is an analytical procedure. The ratio equals the cost of sales divided by the average inventory. A high turnover implies that the entity does not hold stocks of inventories that are unproductive (slow moving, excess, defective, or obsolete). This procedure tests the valuation assertion.
  5. Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?

    A.Vouch a sample of cash disbursements recorded just after year end to receiving reports and vendor invoices.

    B.Compare a sample of purchase orders issued just after year end with the year-end accounts payable trial balance.

    C.Trace a sample of accounts payable entries recorded just before year end to the unmatched receiving report file.

    D.Scan the cash disbursements entries recorded just before year end for indications of unusual transactions.
    A.Vouch a sample of cash disbursements recorded just after year end to receiving reports and vendor invoices

    . The greatest risk in the audit of payables is that unrecorded liabilities exist. Omission of an entry to record a payable is a fraud or error that is more difficult to detect than an inaccurate or false entry. The search for unrecorded payables should include (1) examining cash disbursements made after the balance sheet date and comparing them with the accounts payable trial balance, (2) sending confirmations to vendors with small and zero balances, and (3) reconciling payable balances with vendors’ documentation.
  6. In verifying debits to perpetual inventory records of a nonmanufacturing firm, the auditor would be most interested in examining the purchase
    A.Invoices.

    Vendor invoices, which state the items purchased, the amount due, and the payment terms, document inventory cost when compared with purchase orders and receiving reports.

What would you like to do?

Home > Flashcards > Print Preview