Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 8RQ
To determine
Explain the purpose of record test counts of inventory quantities during the observation of the taking of the physical inventory.
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what are the audit asssertions related to inventory?
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An auditor selected items for test counts while observing a client’s physical inventory. The auditor then traced the test counts to the client’s inventory listing. This procedure most likely obtained evidence concerning management’s balance assertion ofa. Rights and obligations.b. Completeness.c. Existence.d. Valuation and allocation
Chapter 12 Solutions
Principles Of Auditing & Other Assurance Services
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- Analyze some common internal controls over inventories. Explain the significant inherent risks associated with inventory. Explain the process of physical inventory counts and the auditor’s observation of this process.arrow_forwardthe auditor picks an item of inventory from the warehouse and determines whether it is included in the entity's list of inventories a. existence b. completeness c. accuracy d. rightsarrow_forwardAn auditor selected items for test counts from the client’s warehouse during the physical inventory observation. The auditor then traced these test counts into the detailed inventory listing that agreed to the financial statements. This procedure most likely provided evidence concerning management’s assertion ofa. Rights and obligations.b. Completeness.c. Existence.d. Valuation.arrow_forward
- An auditor selected items for test counts while observing a client’s physical inventory.The auditor traced the test counts to the client’s inventory listing. This procedurelikely obtained evidence about which balance-related audit objective for inventory?(1) Existence (3) Completeness(2) Rights and obligations (4) Realizable valuearrow_forwardWhen evaluating inventory controls, an auditor would be least likely toa. Inspect documents.b. Make inquiries.c. Observe procedures.d. Consider policy and procedure manualsarrow_forwardAn auditor usually traces the details of the test counts made during the observation of physical inventory counts to a final inventory compilation. This audit procedure is undertaken to provide evidence that items physically present and observed by the auditor at the time of thephysical inventory count area. Owned by the client.b. Not obsolete.c. Physically present at the time of the preparation of the final inventory schedule.d. Included in the final inventory schedule.arrow_forward
- How does inventory control deficiencies affect the development of audit procedures for inventories?arrow_forwardAnalyze some common internal controls over inventories. Explain the significant inherent risks associated with inventory. Explain the process of physical inventory counts and the auditor’s observation of this process. Describe common substantive procedures used to audit a client’s property, plant, and equipment. How is depreciation audited? How are intangible assets audited?arrow_forwardWhy is it important for auditors to obtain control information over inventory count sheets or tickets?arrow_forward
- An auditor most likely would analyze inventory turnover rates to obtain evidence concerning management’s balance assertions abouta. Existence.b. Rights and obligations.c. Completeness.d. Valuation and allocation.arrow_forwardThe auditor observes the client's inventory test counts and locates the items on the client's inventory listing to test for which of the following financial statement assertions? 1. Completeness. 2. Rights and obligations. 3. Allocation and valuation. 4. Understandability and classification. O 1 O 2 O 3 O 4arrow_forwardWhich of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?a. The entity has rights to the inventory.b. Inventory is properly valued.c. Inventory is properly presented in the financial statements.d. Inventory is completearrow_forward
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