EBK AUDITING & ASSURANCE SERVICES: A SY
11th Edition
ISBN: 9781260687668
Author: Jr
Publisher: MCGRAW-HILL LEARNING SOLN.(CC)
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Chapter 13, Problem 13.20MCQ
To determine
Concept Introduction:
Inventory is the most valuable asset for a company. The company applies controls over inventory for its safeguard and detection of inventory frauds. The auditor also tests these controls to determine the nature and extent of the
Audit risk is a risk that audit may provide an inappropriate opinion on the basis of his findings during the audit. There are some inherent risks and avoidable risk which result in an audit risk.
To choose: the action of the auditor if the control risk is high.
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A client maintains perpetual inventory records in quantities and in dollars. If the assessed control risk is high, an auditor would probablya. Apply gross profit tests to ascertain the reasonableness of the physical counts.b. Increase the extent of tests of controls relevant to the inventory cycle.c. Request the client to schedule the physical inventory count at the end of the year.d. Insist that the client perform physical counts of inventory items several times during the year.
Which of the following timing of inventory count is the best based on the auditor’s point of view when the control risk is assessed at maximum and when there is a high inherent risk for the client? A. Inventory count just after year-endB. Inventory count at year-endC. Inventory count just before year-endD. All of the following are equal and the auditor can choose oneE. Inventory count must be done before year-end, at year-end and after year-end
The auditor generally decides whether the inventory count can be taken before year-end primarily on the basis of:
audit efficiency.
accuracy of the perpetual inventory master files.
client convenience.
audit staff availability.
Chapter 13 Solutions
EBK AUDITING & ASSURANCE SERVICES: A SY
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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- For each of the accounts balances and associated assertions below, select the audit procedure from the list provided that gives the most appropriate audit evidence for the account assertion. Accounts Balance Assertion Procedure Inventory Completeness a. Examine invoices from suppliers. b. Examine invoices paid after year-end and trace to subsidiary ledger. c. Select items located in the inventory warehouse and trace to the inventory listing. d. Trace sales invoices and shipping documents just after year-end to customer accounts. Cash Rights and obligations a. Agree bank statement to the subsidiary ledger. b. Agree the cash balance per the bank reconciliation to the year-end bank statement. c. Review the bank confirmation for information on compensating balances. d. Trace deposits per the bank statement to the cash subsidiary ledger. Accounts Receivable Existence a. Review confirmation of accounts receivable…arrow_forwardWhich of the following audit procedures probably would provide the most reliable evidence related to the entity’s assertion of rights and obligations for the inventory account?a. Trace test counts noted during physical count to the summarization of quantities.b. Inspect agreements for evidence of inventory held on consignment.c. Select the last few shipping advices used before the physical count and determine whether the shipments were recorded as sales.d. Inspect the open purchase order file for significant commitments to consider for disclosure.arrow_forwardWhich of the following procedures would best prevent or detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10 and a few items selling for hundreds of dollars?a. Maintain a perpetual inventory of only the more valuable items with frequent periodic verification of the accuracy of the perpetual inventory record.b. Have an independent accounting firm prepare an internal control report on the effectiveness of the controls over inventory.c. Have separate warehouse space for the more valuable items with frequent periodic physical counts and comparison to perpetual inventory records.d. Require a manager’s signature for the removal of any inventory item with a value of morethan $50.arrow_forward
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