Following are audit procedures commonlyperformed in the inventory and warehousing cycle for a manufacturing company:1. Read the client’s physical inventory instructions and observe whether they are beingfollowed by those responsible for counting the inventory.2. Account for a sequence of inventory tags and trace each tag to the physical inventoryto make sure it actually exists.3. Compare the client’s count of physical inventory at an interim date with the perpetualinventory master file.4. Trace the auditor’s test counts recorded in the audit files to the final inventorycompilation and compare the tag number, description, and quantity.5. Compare the unit price on the final inventory summary with vendors’ invoices.6. Account for a sequence of raw material requisitions and examine each requisitionfor an authorized approval.7. Trace the recorded additions on the finished goods perpetual inventory master fileto the records for completed production.a. Identify whether each of the procedures is primarily a test of control or a substantivetest.b. State the purpose(s) of each of the procedures.
Following are
performed in the inventory and warehousing cycle for a manufacturing company:
1. Read the client’s physical inventory instructions and observe whether they are being
followed by those responsible for counting the inventory.
2. Account for a sequence of inventory tags and trace each tag to the physical inventory
to make sure it actually exists.
3. Compare the client’s count of physical inventory at an interim date with the perpetual
inventory master file.
4. Trace the auditor’s test counts recorded in the audit files to the final inventory
compilation and compare the tag number, description, and quantity.
5. Compare the unit price on the final inventory summary with vendors’ invoices.
6. Account for a sequence of raw material requisitions and examine each requisition
for an authorized approval.
7. Trace the recorded additions on the finished goods perpetual inventory master file
to the records for completed production.
a. Identify whether each of the procedures is primarily a test of control or a substantive
test.
b. State the purpose(s) of each of the procedures.
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