The balance sheet for BCS,Inc.for December 31,2012 and December 31,2011 is provided below.You are working on the audit for the 12/31/12 year-end.The 12/31/11 balance sheet numbers were audited by your CPA firm last year.Use the partial balance sheet for BCS provided below.You have been assigned to audit the ending inventory numbers. $\begin{array}{l}\\Cash\\\text{Trading Investment Securities}\\\text{Allowance for Trading Securities}\\\text{Accounts Receivable}\\\text{Raw Materials Inventory}\\\text{WIP Inventory}\\\text{Finished Goods Inventory}\\\text{Land}\\\text{Building}\\\text{Accumulated Depreciation-Building}\\\text{Construction-in-Progress}\\\text{Accumulated Depreciation-CIP}\\\text{Held-to-Maturity Securities}\\\text{Available for Sale Securities}\\\text{Allowance for Available-for-Sale Securities}\\\end{array}\begin{array}{rr}{12 / 31 / 2012}&{12 / 31 / 2011}\\\hline{25,439} & {32,786} \\345,000 & 436,000 \\54,738 & -23,412 \\120,334 & 143,023 \\275,963 & 345,768 \\34,087 & 32,635 \\348,974 & 438,678 \\2,300,000 & 3,444,567 \\2,256,876 & 2,345,987 \\-1,200,000 & -1,000,000 \\2,345,678 & 2,112,473 \\-100,000 & -75,000 \\1,200,765 & 1,100,325 \\2,100,000 & 3,145,000 \\-786,000 & -943,000\end{array}$ a.Describe how the ending inventory numbers were determined.b.What audit tests did the auditor perform to determine that the ending inventory numbers were accurate?
c.Describe an audit sampling test that you might use to gather evidence for the valuation assertion for inventory.d.How would the auditor determine that inventory exists?
e.How would the auditor determine that the completeness assertion in regard to inventory is met?
f.Can you identify any "red flags" related to the inventory balance? How would you modify your audit procedures to gather evidence in light of the red flags?

Question

The balance sheet for BCS,Inc.for December 31,2012 and December 31,2011 is provided below.You are working on the audit for the 12/31/12 year-end.The 12/31/11 balance sheet numbers were audited by your CPA firm last year.Use the partial balance sheet for BCS provided below.You have been assigned to audit the ending inventory numbers.

\begin{array}{l}\\Cash\\\text{Trading Investment Securities}\\\text{Allowance for Trading Securities}\\\text{Accounts Receivable}\\\text{Raw Materials Inventory}\\\text{WIP Inventory}\\\text{Finished Goods Inventory}\\\text{Land}\\\text{Building}\\\text{Accumulated Depreciation-Building}\\\text{Construction-in-Progress}\\\text{Accumulated Depreciation-CIP}\\\text{Held-to-Maturity Securities}\\\text{Available for Sale Securities}\\\text{Allowance for Available-for-Sale Securities}\\\end{array}\begin{array}{rr}{12 / 31 / 2012}&{12 / 31 / 2011}\\\hline{25,439} & {32,786} \\345,000 & 436,000 \\54,738 & -23,412 \\120,334 & 143,023 \\275,963 & 345,768 \\34,087 & 32,635 \\348,974 & 438,678 \\2,300,000 & 3,444,567 \\2,256,876 & 2,345,987 \\-1,200,000 & -1,000,000 \\2,345,678 & 2,112,473 \\-100,000 & -75,000 \\1,200,765 & 1,100,325 \\2,100,000 & 3,145,000 \\-786,000 & -943,000\end{array}

a.Describe how the ending inventory numbers were determined.b.What audit tests did the auditor perform to determine that the ending inventory numbers were accurate?
c.Describe an audit sampling test that you might use to gather evidence for the valuation assertion for inventory.d.How would the auditor determine that inventory exists?
e.How would the auditor determine that the completeness assertion in regard to inventory is met?
f.Can you identify any "red flags" related to the inventory balance? How would you modify your audit procedures to gather evidence in light of the red flags?

Quizplus · Accepted Answer

The Answer of The balance sheet for BCS,Inc.for December 31,2012 and December 31,2011 is provided below.You are working on the audit for the 12/31/12 year-end.The 12/31/11 balance sheet numbers were audited by your CPA firm last year.Use the partial balance sheet for BCS provided below.You have been assigned to audit the ending inventory numbers. $\begin{array}{l} \ Cash\ \text{Trading Investment Securities}\ \text{Allowance for Trading Securities}\ \text{Accounts Receivable}\ \text{Raw Materials Inventory}\ \text{WIP Inventory}\ \text{Finished Goods Inventory}\ \text{Land}\ \text{Building}\ \text{Accumulated Depreciation-Building}\ \text{Construction-in-Progress}\ \text{Accumulated Depreciation-CIP}\ \text{Held-to-Maturity Securities}\ \text{Available for Sale Securities}\ \text{Allowance for Available-for-Sale Securities}\ \end{array} \begin{array}{rr} {12 / 31 / 2012}&{12 / 31 / 2011}\ \hline {25,439} & {32,786} \ 345,000 & 436,000 \ 54,738 & -23,412 \ 120,334 & 143,023 \ 275,963 & 345,768 \ 34,087 & 32,635 \ 348,974 & 438,678 \ 2,300,000 & 3,444,567 \ 2,256,876 & 2,345,987 \ -1,200,000 & -1,000,000 \ 2,345,678 & 2,112,473 \ -100,000 & -75,000 \ 1,200,765 & 1,100,325 \ 2,100,000 & 3,145,000 \ -786,000 & -943,000 \end{array}$ a.Describe how the ending inventory numbers were determined.b.What audit tests did the auditor perform to determine that the ending inventory numbers were accurate? c.Describe an audit sampling test that you might use to gather evidence for the valuation assertion for inventory.d.How would the auditor determine that inventory exists? e.How would the auditor determine that the completeness assertion in regard to inventory is met? f.Can you identify any "red flags" related to the inventory balance? How would you modify your audit procedures to gather evidence in light of the red flags?

The Balance Sheet for BCS,Inc ADescribe How the Ending Inventory Numbers Were Determined