AUDITING RMU
11th Edition
ISBN: 9781260934830
Author: MESSIER
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 13, Problem 13.14MCQ
To determine
Concept Introduction:
Internal controls are policies and procedures defined by the management to ensure the smooth functioning of the business processes. Internal controls ensure the complete and correct accounting and safeguards to the assets.
To choose: the objective of the internal control over inventory management process.
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Describe how the functions of (a) authorization of production transactions, (b) recording of thesetransactions, and (c) physical custody of inventories can be separated among the production,inventory, and cost accounting departments.
Tests of Controls Related to Controls and Assertions. Each of the following tests of controls could be performed during the audit of the controls in the production cycle.Required:For each procedure, identify (a) the internal control activity (strength) being tested and (b) the assertion(s) being addressed.1. Balance and reconcile detailed production cost sheets to the work-in-process inventory control account.2. Scan closed production cost sheets for missing numbers in the sequence.3. Vouch a sample of open and closed production cost sheet entries to (a) labor reports and (b) issue forms and materials used reports.4. Locate the material issue forms and determine whether they are (a) prenumbered, (b) kept in a secure location, and (c) available to unauthorized persons.5. Select several summary journal entries in the work-in-process inventory and (a) vouch them to weekly labor and material reports and to production cost sheets and (b) trace them to the control account.6. Select a…
The auditor tests the quantity of materials charged to work-in-process by vouching these quantities toa. Cost ledgers.b. Perpetual inventory records.c. Receiving reports.d. Material requisitions
Chapter 13 Solutions
AUDITING RMU
Ch. 13 - Prob. 13.1RQCh. 13 - Prob. 13.2RQCh. 13 - Prob. 13.3RQCh. 13 - Prob. 13.4RQCh. 13 - Prob. 13.5RQCh. 13 - Prob. 13.6RQCh. 13 - Prob. 13.7RQCh. 13 - Prob. 13.8RQCh. 13 - Prob. 13.9RQCh. 13 - Prob. 13.10RQ
Ch. 13 - Prob. 13.11RQCh. 13 - Prob. 13.12RQCh. 13 - Prob. 13.13RQCh. 13 - Prob. 13.14MCQCh. 13 - Prob. 13.15MCQCh. 13 - Prob. 13.16MCQCh. 13 - Prob. 13.17MCQCh. 13 - Prob. 13.18MCQCh. 13 - Prob. 13.19MCQCh. 13 - Prob. 13.20MCQCh. 13 - Prob. 13.21MCQCh. 13 - Prob. 13.22MCQCh. 13 - Prob. 13.23MCQCh. 13 - Prob. 13.24MCQCh. 13 - Prob. 13.25MCQCh. 13 - Prob. 13.26MCQCh. 13 - Prob. 13.27PCh. 13 - Prob. 13.28PCh. 13 - Prob. 13.29PCh. 13 - Prob. 13.30PCh. 13 - Prob. 13.31PCh. 13 - Prob. 13.32P
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- Describe a walkthrough of a production transaction from receiving production orders to making an entry in the finished goods perpetual inventory records. What document copies would be collected?What controls noted? What duties separated?arrow_forwardWhen an auditor tests a client’s cost accounting records, the auditor’s tests are primarily designed to determine that(1) costs have been correctly assigned to finished goods, work-in-process, and costof goods sold.(2) quantities on hand have been computed based on acceptable cost accountingtechniques that reasonably approximate actual quantities on hand.(3) physical inventories are in substantial agreement with book inventories.(4) the internal controls are in accordance with accounting standards and are functioning as planned.arrow_forwardIdentify important internal control activities present in a properly designed system to mitigate the risk of material misstatements for each relevant assertion in the production cycle.arrow_forward
- From a risk perspective, the PRIMARY objective for classifying data is: a) To ensure the completeness of the company's data inventory b) Establish appropriate control measures, depending upon the asset classification level. c) To support user account administration procedures. d) To limit access to personally identifiable informationarrow_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_forwardWhen testing a company’s cost accounting system, the auditor uses procedures that are primarily designed to determine thata. Quantities on hand have been computed based on acceptable cost accounting techniques that reasonably approximate actual quantities on hand.b. Physical inventories agree substantially with book inventories.c. The system is in accordance with generally accepted accounting principles and is functioning as planned.d. Costs have been properly assigned to finished goods, work-in-process, and cost of goods sold.arrow_forward
- Describe FOUR internal control procedures an auditor would expect the company to put in place in respect of inventoriesarrow_forwardAuthorization and Segregation of duties are the part of __________ a. Internal Control system b. Internal check system c. Internal audit system d. Internal Accountingarrow_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
- Which of the following elements of internal control includes maintaining records of employees documenting their compensation and promotion? Control procedures Monitoring Control environment Risk assessmentarrow_forwardProvide the control objectives the auditor must ensure when auditing the acquisition andpayment cycle auditarrow_forwardDescribe the steps that auditors use to test controls over sales and collections. Please provide references if any.arrow_forward
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