Question 1

Which of the following is the assertion with the highest inherent risk in auditing inventory?

Accepted Answer

Existence assertion has the highest inherent risk in auditing inventory because it is susceptible to errors such as the inclusion of fictitious inventory or the exclusion of actual inventory. This assertion is also difficult to test as it requires physical observation and is subject to manipulation by management. Completeness, rights, and proper classification assertions also carry inherent risk but not as high as existence.

Question 2

An auditor is examining a nonpublic company's inventory procurement system and has decided to perform tests of controls.Under which of the following conditions should the auditor perform tests of controls?

Accepted Answer

The auditor should perform tests of controls if they believe it could lead to a reduction in overall audit time and cost. This is because if the controls are working effectively, the auditor can rely on them and reduce the amount of substantive testing needed, which in turn reduces the time and cost of the audit. Option A is incorrect because if significant weaknesses are found in the internal control, the auditor would need to perform substantive testing rather than only tests of controls. Option B is also incorrect because tests of controls are not used to assess inherent risk, but to gain assurance that the controls are operating effectively. Option D is incorrect because tests of controls are not always performed when assessing control risk, but are only performed when the auditor believes they could reduce overall audit time and cost.

Question 3

An auditor's observation procedures for inventory may be performed during or after the end of the period under audit under which of the following conditions?

Accepted Answer

The option D states that if the client maintains well-kept perpetual inventory records and checks them periodically by comparing with physical counts, then the auditor can perform the observation procedures during or after the period under audit. This is because the perpetual system allows for a continuous and updated record of inventory, making it easier for the auditor to compare it with the physical count. Hence option D is the best choice. Options A, B, and C do not provide enough relevant information to conclude whether observation procedures can be performed during or after the period under audit.

Question 4

Materials requisitions should be compared in the __________________________________ department with the ______________________________________ on the production order.
Reference: Question also found in study guide

Accepted Answer

The answer of Materials requisitions should be compared in the...

Question 5

Production reports of finished units should be signed by the __________________________________ and finished goods inventory custodian and forwarded to _______________________________.
Reference: Question also found in study guide

Accepted Answer

The answer of Production reports of finished units should be...

Question 6

The typical functions of the production and conversion includes

Accepted Answer

The answer of The typical functions of the production and...

Question 7

Vouching a sample of items from the perpetual inventory records to the receiving reports achieves the specific ASB balance assertion of

Accepted Answer

Vouching a sample of items from the perpetual inventory records to the receiving reports ensures that the items actually existed and were received, fulfilling the occurrence assertion.

Question 8

The production planner determines what inventory is need for future production using

Accepted Answer

The bill of materials (BOM) for the product being produced is a comprehensive list of all materials, components, and assemblies required to manufacture the product. The BOM includes the quantity of each item required to make the final product. Therefore, the production planner can determine what inventory is needed for the future production by referring to the BOM. The finished goods inventory status report provides information on the inventory of completed products and not the materials required for future production. Standard costs and manpower availability reports are essential but do not help in determining inventory needs for future production.

Question 9

When a production plan is complete the production planner needs to determine

Accepted Answer

Once a production plan is complete, the production planner needs to determine what raw materials need to be ordered to ensure that production can proceed as planned.

Question 10

The overall production starts with production planning,which usually is based on a _______________________________________.
Reference: Question also found in study guide

Accepted Answer

The answer of The overall production starts with production planning,which...

Question 11

Maple Company has an increase in purchases from specific vendors and an increase in raw materials inventory for the items purchased from these vendors.Sales for the company have not increased and are not forecast to increase.From this information an auditor might suspect

Accepted Answer

The increase in purchases from specific vendors and an increase in raw materials inventory for the items purchased from these vendors might indicate that kickbacks are being received from these vendors. This could be a potential area of fraud, and the auditor should investigate further. The other options, such as an increase in obsolete inventory or poor security over raw material inventory, can't be conclusively determined from the given information.

Question 12

At the beginning of the observation of the inventory count,the auditor records the last bill of lading used by the company to

Accepted Answer

Recording the last bill of lading used by the company helps the auditor test inventory cut-off. This means verifying that all items received before the end of the reporting period have been included in the ending inventory count and all items received after the end of the period have been excluded.

Question 13

Tracing production cost accumulation forward into the production cost reports in the cost accounting department is a test for ____________________________.
Reference: Question also found in study guide

Accepted Answer

The answer of Tracing production cost accumulation forward into the...

Question 14

Which of the following would be considered an analytical procedure?

Accepted Answer

Analytical procedures involve analyzing relationships between financial and non-financial data to identify significant fluctuations or unusual items. Comparing inventory balances to recent sales activities would be considered an analytical procedure as it involves analyzing the relationship between two financial data points. The other options involve testing controls (A), statistical sampling (C), and reconciling inventory (D), which are not considered analytical procedures.

Question 15

The function of _________________________________ refers to comparing the physical count of inventory to the perpetual inventory records.
Reference: Question also found in study guide

Accepted Answer

The answer of The function of _________________________________ refers to comparing...

Question 16

Which of the following procedures would be most appropriate for testing the completeness assertion as it applies to inventory?

Accepted Answer

The answer of Which of the following procedures would be...

Question 17

________________________________ are used by the purchasing department to place orders for materials.
Reference: Question also found in study guide

Accepted Answer

The answer of ________________________________ are used by the purchasing department...

Question 18

Production planning interacts with the preparation of ____________________________________.
Reference: Question also found in study guide

Accepted Answer

The answer of Production planning interacts with the preparation of...

Question 19

A production order usually includes a ________________________________.
Reference: Question also found in study guide

Accepted Answer

The answer of A production order usually includes a ________________________________.
Reference:...

Question 20

_____________________________ can be used in connection with knowledge of the shape of management's plans for the year under audit.
Reference: Question also found in study guide

Accepted Answer

The answer of _____________________________ can be used in connection with...

Quiz 9: Production Cycle

Which of the following is the assertion with the highest inherent risk in auditing inventory?

An auditor is examining a nonpublic company's inventory procurement system and has decided to perform tests of controls.Under which of the following conditions should the auditor perform tests of controls?

An auditor's observation procedures for inventory may be performed during or after the end of the period under audit under which of the following conditions?

Materials requisitions should be compared in the department with the ____ on the production order. Reference: Question also found in study guide

Production reports of finished units should be signed by the ____ and finished goods inventory custodian and forwarded to _. Reference: Question also found in study guide

The typical functions of the production and conversion includes

Vouching a sample of items from the perpetual inventory records to the receiving reports achieves the specific ASB balance assertion of

The production planner determines what inventory is need for future production using

When a production plan is complete the production planner needs to determine

The overall production starts with production planning,which usually is based on a _______________________________________. Reference: Question also found in study guide

Maple Company has an increase in purchases from specific vendors and an increase in raw materials inventory for the items purchased from these vendors.Sales for the company have not increased and are not forecast to increase.From this information an auditor might suspect

At the beginning of the observation of the inventory count,the auditor records the last bill of lading used by the company to

Tracing production cost accumulation forward into the production cost reports in the cost accounting department is a test for ____________________________. Reference: Question also found in study guide

Which of the following would be considered an analytical procedure?

The function of _________________________________ refers to comparing the physical count of inventory to the perpetual inventory records. Reference: Question also found in study guide

Which of the following procedures would be most appropriate for testing the completeness assertion as it applies to inventory?

________________________________ are used by the purchasing department to place orders for materials. Reference: Question also found in study guide

Production planning interacts with the preparation of ____________________________________. Reference: Question also found in study guide

A production order usually includes a ________________________________. Reference: Question also found in study guide

_____________________________ can be used in connection with knowledge of the shape of management's plans for the year under audit. Reference: Question also found in study guide

Quiz 9: Production Cycle

Which of the following is the assertion with the highest inherent risk in auditing inventory?

An auditor is examining a nonpublic company's inventory procurement system and has decided to perform tests of controls.Under which of the following conditions should the auditor perform tests of controls?

An auditor's observation procedures for inventory may be performed during or after the end of the period under audit under which of the following conditions?

Materials requisitions should be compared in the __________________________________ department with the ______________________________________ on the production order. Reference: Question also found in study guide

Production reports of finished units should be signed by the __________________________________ and finished goods inventory custodian and forwarded to _______________________________. Reference: Question also found in study guide

The typical functions of the production and conversion includes

Vouching a sample of items from the perpetual inventory records to the receiving reports achieves the specific ASB balance assertion of

The production planner determines what inventory is need for future production using

When a production plan is complete the production planner needs to determine

The overall production starts with production planning,which usually is based on a _______________________________________. Reference: Question also found in study guide

Maple Company has an increase in purchases from specific vendors and an increase in raw materials inventory for the items purchased from these vendors.Sales for the company have not increased and are not forecast to increase.From this information an auditor might suspect

At the beginning of the observation of the inventory count,the auditor records the last bill of lading used by the company to

Tracing production cost accumulation forward into the production cost reports in the cost accounting department is a test for ____________________________. Reference: Question also found in study guide

Which of the following would be considered an analytical procedure?

The function of _________________________________ refers to comparing the physical count of inventory to the perpetual inventory records. Reference: Question also found in study guide

Which of the following procedures would be most appropriate for testing the completeness assertion as it applies to inventory?

________________________________ are used by the purchasing department to place orders for materials. Reference: Question also found in study guide

Production planning interacts with the preparation of ____________________________________. Reference: Question also found in study guide

A production order usually includes a ________________________________. Reference: Question also found in study guide

_____________________________ can be used in connection with knowledge of the shape of management's plans for the year under audit. Reference: Question also found in study guide

Materials requisitions should be compared in the department with the ____ on the production order. Reference: Question also found in study guide

Production reports of finished units should be signed by the ____ and finished goods inventory custodian and forwarded to _. Reference: Question also found in study guide