7 The following questions may be posed by auditors to their clients to obtain an understanding ofinternal 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 manufacturingoverhead?2. Is there a stated policy with specific criteria for writing off obsolete or slow-movinggoods?3. Are physical inventory counts made by someone other than storekeepers and thoseresponsible for maintaining the perpetual inventory master file?4. Is all inventory stored under the control of an inventory custodian in areas where accessis limited? RequiredFor 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 noteffective;d) For two of the potential misstatements identified in part c), list a substantive auditprocedure to determine whether a material misstatement exists.

Here asked for multi sub part question we will solve for first three sub part question for you. If…

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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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