Wares kings’ financial year-end is 31 December. Does the auditor need to obtain evidence about the performance of the inventory control system from every month in the year or from a sample of months? Explain
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Wares kings’ financial year-end is 31 December. Does the auditor need to obtain evidence about the performance of the inventory
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- DineshbhaiAn inventory system designed to ensure that anitem will be available on an ongoing basis throughout the year isknown asThe client recorded 100 Dell desktop computers in the inventory account on 30 June 2021. Each costs $2800. The auditor performed a physical count on 6 July 2021 and found 80 units in the warehouse. Which of the following follow-up procedures is not directly relevant for auditors to verify the existence of inventory at the financial year-end? Auditors enquire various warehouse staff about inventory disposals between 1 July and 6 July. The auditor takes a sample of sales invoices and matches them to shipping documents. For the missing inventory items without legitimate explanation, the auditor recommends the client adjust for the amount overstated. The auditor could obtain an inventory movement register from the client warehouse manager to see if the client sold this model between 1 July and 6 July. Auditors enquire the warehouse manager about inventory disposals between 1 July and 6 July.
- Scope Limitations. D. Brady has been engaged as the auditor of Patriot Company andis currently planning the year-end physical inventory counts. Patriot is a retailer that holdssignificant inventories in its warehouses and stores in six regions across the United States.Because of timing and logistics, Brady is able to observe the physical inventory at only oneof Patriot’s warehouses, which accounts for 20 percent of Patriot’s inventories.In Brady’s professional judgment, the fact that inventories held at only one warehousecan be observed does not provide sufficient evidence with respect to Patriot’s inventorybalances at the date of the financial statements. Although physical inventory counts couldbe delayed at the remaining warehouses for Brady to observe the counts, the flow of goodsin and out of the warehouses would result in a discrepancy between the inventory quantitieson hand at year-end and the inventory quantities on hand at the date of the count.Required:a. Assume that Brady…Taking a physical count of inventory is not necessary when a periodic inventory system is used should be done near year-end has no internal control relevance is not necessary when a perpetual inventory system is usedJournalize the following transactions that occurred in March for Downton Company. Assume Downton uses the periodic inventory system. No explanations are needed. Identify each accounts payable and accounts receivable with the vendor or customer name. Downton estimates sales returns at the end of each month. (Record debits first, then credits. Exclude explanations from journal entries. Assume the company records sales at the net amount. Round all amounts to the nearest whole dollar.) More info Mar. 3 Mar. 4 Mar. 4 Mar. 6 Mar. 8 Mar. 9 Mar. 10 Mar. 12 Mar. 13 Mar. 15 Mar. 22 Mar. 23 Mar. 25 Mar. 29 Mar. 30 Purchased merchandise inventory on account from Sherry Wholesalers, $4,000. Terms 1/15, n/EOM, FOB shipping point. Paid freight bill of $90 on March 3 purchase. Purchase merchandise inventory for cash of $1,900. Returned $1,100 of inventory from March 3 purchase. Sold merchandise inventory to Hillis Company, $2,500, on account. Terms 1/15, n/35. Purchased merchandise inventory on…
- On August 31, 2010, Harvey Co. decided to change from the FIFO periodic inventory system to the weightedaverage periodic inventory system. Harvey is on a calendar year basis. The cumulative effect of the change is determineda. As of January 1, 2010.b. As of August 31, 2010. c. During the eight months ending August 31, 2010, by a weighted-average of the purchases.d. During 2010 by a weighted-average of the purchases.Sales/Inventory Cutoff. Your client took a complete physical inventory count under your observation as of December 15 and adjusted the inventory control account (perpetual inventory method) to agree with the physical inventory. After considering the count adjustments as of December 15 and after reviewing the transactions recorded from December 16 to December 31, you are almost ready to accept the inventory balance as fairly stated. However, your review of the sales cutoff as of December 15 and December 31 disclosed the following items not previously considered: Required:What adjusting journal entries, if any, would you make for each of these items? Explain why each adjustment is necessaryUse the following information for the next two questions: Thursday Co. is estimating the cost of its inventory at month-end. The accountant determined the following:
- Select the best answer for the following statement: A company typically takes its physical inventory [ Select] [ Select] when it has the greatest amount of inventory of its shelves when it has the least amount of inventory of its shelves on the last day of the fiscal yearAudit Procedures 1. Select a sample of inventory items in the factory warehouse and trace each item to the inventory count sheets to determine whether it has been included and whether the quantity and description are correct. 2. Trace selected quantities from the inventory list to the physical inventory to make sure that it exists and the quantities are the same. 3. Compare the quantities on hand and unit prices on this year's inventory count sheets with those in the preceding year as a test for large differences. 4. Read the footnote disclosures related to the company's accounting policies for valu- ing inventory to make sure the information provided correctly reflects the method used to value inventory. 5. Test the extension of unit prices times quantity on the inventory list for a sample of inventory items, test foot the list, and compare the total to the general ledger. that 6. Send letters directly to third parties who hold the client's inventory, and request they respond directly…
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