A CPA’s client, Boos & Baumkirchner, Inc., is a medium-sizemanufacturer of products for the leisure-time activities market (camping equipment,scuba gear, bows and arrows, and so forth). During the past year, a computer system wasinstalled and inventory records of finished goods and parts were converted to computerprocessing. The inventory master file is maintained on a disk. Each record of the filecontains the following information:• Item or part number • Total value of inventory on hand at cost• Description • Date of last sale or usage• Size • Quantity used or sold this year• Unit-of-measure code • Economic order quantity• Quantity on hand • Code number of major vendor• Cost per unit • Code number of secondary vendorIn preparation for year-end inventory, the client has two identical sets of preprintedinventory count cards. One set is for the client’s inventory counts, and the other is for theCPA’s use to make audit test counts. The following information is on each card:• Item or part number • Size• Description • Unit-of-measure codeIn taking the year-end inventory, the client’s personnel will write the actual countedquantity on the face of each card. When all counts are complete, the counted quantity willbe entered into the system. The cards will be processed against the inventory database,and quantity-on-hand figures will be adjusted to reflect the actual count. A computergenerated edit listing will be prepared to show any missing inventory count cards andall quantity adjustments of more than $100 in value. These items will be investigated byclient personnel, and all required adjustments will be made. When adjustments have beencompleted, the final year-end balances will be computed and posted to the general ledger.The CPA has available generalized audit software that will run on the client’s computerand can process both card and disk files.a. In general and without regard to the facts in this case, discuss the nature ofgeneralized audit software and list the various types and uses.b. List and describe at least five ways generalized audit software can be used to assist inall aspects of the audit of the inventory of Boos & Baumkirchner, Inc. (For example,the software can be used to read the disk inventory master file and list items andparts with a high unit cost or total value. Such items can be included in the testcounts to increase the dollar coverage of the audit verification.)
A CPA’s client, Boos & Baumkirchner, Inc., is a medium-size
manufacturer of products for the leisure-time activities market (camping equipment,
scuba gear, bows and arrows, and so forth). During the past year, a computer system was
installed and inventory records of finished goods and parts were converted to computer
processing. The inventory master file is maintained on a disk. Each record of the file
contains the following information:
• Item or part number • Total value of inventory on hand at cost
• Description • Date of last sale or usage
• Size • Quantity used or sold this year
• Unit-of-measure code • Economic order quantity
• Quantity on hand • Code number of major vendor
• Cost per unit • Code number of secondary vendor
In preparation for year-end inventory, the client has two identical sets of preprinted
inventory count cards. One set is for the client’s inventory counts, and the other is for the
CPA’s use to make audit test counts. The following information is on each card:
• Item or part number • Size
• Description • Unit-of-measure code
In taking the year-end inventory, the client’s personnel will write the actual counted
quantity on the face of each card. When all counts are complete, the counted quantity will
be entered into the system. The cards will be processed against the inventory database,
and quantity-on-hand figures will be adjusted to reflect the actual count. A computergenerated edit listing will be prepared to show any missing inventory count cards and
all quantity adjustments of more than $100 in value. These items will be investigated by
client personnel, and all required adjustments will be made. When adjustments have been
completed, the final year-end balances will be computed and posted to the general ledger.
The CPA has available generalized audit software that will run on the client’s computer
and can process both card and disk files.
a. In general and without regard to the facts in this case, discuss the nature of
generalized audit software and list the various types and uses.
b. List and describe at least five ways generalized audit software can be used to assist in
all aspects of the audit of the inventory of Boos & Baumkirchner, Inc. (For example,
the software can be used to read the disk inventory master file and list items and
parts with a high unit cost or total value. Such items can be included in the test
counts to increase the dollar coverage of the audit verification.)
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