Delaney Humphrey was explaining the importance of documentary evidence. Whichassertion was she referring to when she obtained details of the price paid for inventory andtraced it to the supplier's invoice to verify the amount recorded?a) completenessb) accuracyc) classification and understandabilityd) none of the above

The audit is the detailed process of checking and verifying books of accounts and financial…

Delaney Humphrey was explaining the importance of documentary evidence. Which assertion was she referring to when she obtained details of the price paid for inventory an traced it to the supplier's invoice to verify the amount recorded? a) completeness b) accuracy c) classification and understandability d) none of the aboye

Delaney Humphrey was explaining the importance of documentary evidence. Which assertion was she referring to when she obtained details of the price paid for inventory an traced it to the supplier's invoice to verify the amount recorded? a) completeness b) accuracy c) classification and understandability d) none of the aboye

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 20RQSC

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Similar questions

In an audit of inventories, an auditor would most likely verify that: a. All inventory owned by the client is on hand at the time of the count. b. The client has used proper inventory pricing to reflect fair market value. c. The financial statement presentation of inventories is appropriate. d. Damaged goods and obsolete items have been recorded at historical cost. e. Goods-in-Transit, shipped to the client F.O.B. destination, are properly included in inventory.
As part of your audit of a client's inventory balance, you created an expectation of what should be the inventory balance by using the gross profit method. The difference between your expectation using the gross profit method of estimating inventory as against the client reported balance is above audit materiality level for audit of inventory. What should you do next? a. Discuss with the management the implication of the significant difference and propose an adjusting journal entry accordingly.b. Extend audit procedures by doing further analytical procedures on the inventory balance.c. Extend audit procedures by doing test of details of the account balance.d. Issue a qualified opinion on the basis of a material misstatement in the client's inventory.e. None of the above
Which 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.
Choose the one correct answer. As part of your audit of a client's inventory balance, you created an expectation of what should be the inventory balance by using the gross profit method. The difference between your expectation using the gross profit method of estimating inventory as against the client reported balance is above audit materiality level for audit of inventory. What should you do next? a. Discuss with the management the implication of the significant difference and propose an adjusting journal entry accordingly.b. Extend audit procedures by doing further analytical procedures on the inventory balance.c. Extend audit procedures by doing test of details of the account balance.d. Issue a qualified opinion on the basis of a material misstatement in the client's inventory.e. None of the above
Which of the following procedure is designed to prevent the company from ordering unnecessary items? A. Periodic counts of inventory and reconciliaton of counts to inventory records B. Using approved suppliers C. Requiring purchasing agents to disclose any financial investments in potential suppliers D. Approval of purchase requisitions
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
Which of the following is a substantive test in relation to completeness? a.Inspect physical inventory, checking from physical stock to inventory records. b.Enquire of management and scan inventory records to identify any obsolete, excess or slow-moving inventory. c.Inspect physical inventory, checking from inventory records to physical stock. d.Recalculate depreciation or depletion calculations.
The primary reason why auditors observe client's physical inventory is to make sure the amount of inventory reported in the Statement of Financial Position actually exists and fully owned by the company.a. Explain various audit procedures that should be performed by auditor to determine the slow-moving or obsolete items included in the inventory count. What is the important of attendance of the auditors during the physical inventory count?
You are testing inventory. You determined that inventory exists, nothing is missing from inventory, the calculations are done correctly, the valuation of the inventory is done properly, the inventory is also properly classified and presented in the financials. Can you be reasonably certain that the inventory is not materially misstated? Explain?
Which of the following statements is incorrect? Select one: a. By using the IFRS, goods shipped on consignment from a seller to another company should be included in the inventory of the seller. b. Many argue that LIFO provides a better matching of current costs against revenue from a financial reporting point of view. c. Both IFRS and GAAP account for inventory acquisitions at historical cost and value inventory at the lower-of-cost-or-net-realizable value subsequent to acquisition. d. Both inventory and net income are higher when companies use LIFO in a period of inflation.
An auditor would vouch inventory on the inventory status report to the vendor’s invoice toobtain evidence concerning management’s balance assertions abouta. Existence.b. Rights and obligations.c. Completeness.d. Valuation
Which of the following auditing procedures probably would provide the most reliable evidence concerning the entity’s assertion of rights and obligations related to inventories?a. Trace test counts noted during the entity’s physical count to the entity’s summarization of quantities.b. Inspect agreements to determine whether any inventory is pledged as collateral or subject to any liens. c. Select the last few shipping documents used before the physical count and determine whether the shipments were recorded as sales.d. Inspect the open purchase order file for significant commitments that should be considered for disclosure.