Required For each of the questions above, answer the following: a) State the purpose of the internal control; b) Identify a test of control to assess its effectiveness; c) Identify the nature of the potential financial misstatement(s) if the control is not effective; d) For two of the potential misstatements identified in part c), list a substantive audit procedure to determine whether a material misstatement exists.
Required For each of the questions above, answer the following: a) State the purpose of the internal control; b) Identify a test of control to assess its effectiveness; c) Identify the nature of the potential financial misstatement(s) if the control is not effective; d) For two of the potential misstatements identified in part c), list a substantive audit procedure to determine whether a material misstatement exists.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
7
Transcribed Image Text:The following questions may be posed by auditors to their clients to obtain an understanding of
internal control in the inventory and warehousing cycle. In answering the questions, a "yes"
response indicates a possible internal control, whereas a "no" indicates a potential deficiency.
1. Are standard cost records used for raw materials, direct labour and manufacturing
overhead?
2. Is there a stated policy with specific criteria for writing off obsolete or slow-moving
goods?
3. Are physical inventory counts made by someone other than storekeepers and those
responsible for maintaining the perpetual inventory master file?
4. Is all inventory stored under the control of an inventory custodian in areas where access
is limited?
Transcribed Image Text:Required
For each of the questions above, answer the following:
a) State the purpose of the internal control;
b) Identify a test of control to assess its effectiveness;
c) Identify the nature of the potential financial misstatement(s) if the control is not
effective;
d) For two of the potential misstatements identified in part c), list a substantive audit
procedure to determine whether a material misstatement exists.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education