Answered: The tests of controls for inventory…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter11: Auditing Inventory, Goods And Services, And Accounts Payable: The Acquisition And Payment Cycle

Section: Chapter Questions

Problem 32CYBK

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Question

The tests of controls for inventory records would include the following procedures.
A. Existence.
B. Rights.
C. Completeness.
D. Valuation.
E. Presentation and disclosure.
For each of the procedures, choose the letter of the correct PCAOB assertion(s). Only one letter
per procedure should be used.

_______ 1. Trace a sample of sales invoices to perpetual
inventory record entry of issue.
_______ 2. Select a sample of inventory item from perpetual
records and vouch additions to receiving reports.
_______ 3. Select a sample of shipping documents and review the
accounting summary of the quantities and prices.
_______ 4. Trace posting of sample of sales invoices to amounts
in general ledger.
_______ 5. Review the appropriateness of standard costs to price
inventory issues and cost of goods sold

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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