uestion 2: Following are audit procedures commonly per- formed 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. Use audit software to compute inventory turnover by major product line and com- pare it to turnover in the prior year. 3. Account for a sequence of inventory tags and trace each tag to the physical inventory to make sure it actually exists. 4. Compare the client’s count of physical inventory at an interim date with
uestion 2: Following are audit procedures commonly per- formed 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. Use audit software to compute inventory turnover by major product line and com- pare it to turnover in the prior year. 3. Account for a sequence of inventory tags and trace each tag to the physical inventory to make sure it actually exists. 4. Compare the client’s count of physical inventory at an interim date with
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question 2:
Following are audit procedures commonly per- formed 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. Use audit software to compute inventory turnover by major product line and com- pare it to turnover in the prior year.
3. Account for a sequence of inventory tags and trace each tag to the physical inventory to make sure it actually exists.
4. Compare the client’s count of physical inventory at an interim date with the per- petual inventory master file.
5. Trace the auditor’s test counts recorded in the audit files to the final inventory com- pilation and
compare the tag number, description, and quantity.
6. Compare the unit price on the final inventory summary with vendors’ invoices.
7. Account for a sequence of raw material requisitions and examine each requisition for
an authorized approval.
8. Trace the recorded additions on the finished goods perpetual inventory master file to
the records for completed production
Requirements:
b. State the purpose(s) of each of the procedures.
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