Parsons Inc. has proposed a change from one inventory accounting method to another for financial reporting purposes. The auditor indicates that a change would be permitted only if it is to a preferable method. What difficulties develop in assessing preferability?

Q: Which of the following is not an advantage of a perpetual inventory system? a. Assists in the…

A: The perpetual inventory method is a much better method in comparison to the periodic inventory…

Q: Under which of the following conditions can a disclaimer of opinion never be issued?a. The entity’s…

A: A disclaimer of opinion is a declaration provided in the form of a statement by the auditor, when…

Q: Classify each of the following accepted accounting practices as conservative or aggressive.1. Use…

A: Conservative Accounting– Conservative accounting practice means use of the technique for…

Q: Where there is a reversal of a previous inventory write-down, the entry would involve a _______to…

A: Inventory is the combination of all the goods which are ready for sale, goods which are in process,…

Q: der which of the following conditions can a disclaimer  of opinion never be issued?     The…

A: Auditors issue a disclaimer opinion to financial statements when they are unable to obtain…

Q: Changing the method of inventory valuation should be reported in the financial statements under what…

A: Inventory- A manufacturing company's inventory is a critical current asset. Inventory refers to the…

Q: From the auditors’ point of view, inventory counts are more acceptable prior to the year-endwhena.…

A: Inventory Count:   The procedure of physically counting or verifying the inventory numbers and…

Q: Delaney Humphrey was explaining the importance of documentary evidence. Which assertion was she…

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

Q: A typical substantive procedure for inventory balance and purchase transactions may include…

A: The question is related to the Substantive audit procedures. The Substantive audit procedures are…

Q: Which of the following statement about the inventory write-down is not correct? * If the cost is…

A: As per International Accounting Standards IAS 2- “ Inventory includes assets that are held for the…

Q: If the net realizable of an entity's inventories is less than its cost, the entry to adjust the…

A: Introduction: Under the lower of cost or net realizable value (LCNRV) method, if net selling price…

Q: Indicate the effects of inventory errors on the financial statements

A: Solution- 1-A merchandising company must be sure that it has properly valued its ending inventory.…

Q: The Rider Company uses the gross profit method to estimate ending inventory and cost of goods sold.…

A: In order to accurately estimate the ending inventory under the gross profit method, the cost…

Q: Which of the following is a substantive test in relation to completeness? a. Inspect physical…

A: Inspect physical inventory, checking from inventory records to physical stock is an Audit assertion…

Q: which of the following is not true regarding standards for interim reporting? a. declines in…

A: The interim reporting refers to the reporting under which the financial reports for a shorter period…

Q: True or False

A: Given statement is: Under the periodic inventory system, the merchandise inventory account is not…

Q: When auditing merchandise inventory at year-end, the auditor performs audit procedures to obtain…

A: Goods received on consignment shall not be included in the inventory of consignee.

Q: T, F. Under the GAAP rule, inventories can be reported at above cost in the balance sheet. T, F. If…

A: Under GAAP rules , inventory is valued at cost or net realizable value which ever is lower due to…

Q: Do you agree with the following statements? Express your opinion on each statement.

A: 1: This statement is correct  This can be explained with the help of example: Suppose closing stock…

Q: The three types of accounting changes, including error correction, are:                         Code…

A: Introduction:- The following three types of accounting changes, including error correction as…

Q: Which statement is not true about the gross profit method of inventory valuation? None of these It…

A: Inventory is one of the important current asset of the business. Valuation and management of…

Q: Do you agree with the following statements? Express your opinion on each statement. An inventory…

A: 1) This statement is correct  This can be explain with the help of example: Suppose closing stock is…

Q: A multinational corporation has changed its method of valuing inventory from FIFO to LIFO and the…

A: An auditor, based on the financial statements of the entity can provide his opinions in the report…

Q: Generally accepted accounting principles should be applied consistently from period to period.…

A: Changes in inventory: Change in inventory method is said to be the difference between the previous…

Q: A company that uses the periodic inventory system makes the following errors:…

A: Periodic inventory system refers to a method of inventory valuation in which physical count of…

Q: When a company changes its inventory method to LIFO, an exception is made for the way accounting…

A: Explain the difference in the accounting treatment of a change to the LIFO inventory method from…

Q: A CPA conducts audit for ABC company. As a result of ABC management's refusal to permit the CPA to…

A: SOLUTION- AS MENTION IN THE QUESTION ABC MANAGEMENT REFUSE TO PERMIT CPA TO PHYSICALLY EXAMINE…

Q: Analysts must recognize that the use of the specific identification method to value inventory has a…

A: The amount, by which the Inventory Level exceeds the Closing Inventory level is referred to as the…

Q: Which of these situations would require auditors to append an emphasis-of-matter paragraph about…

A: Answer:   Option d.

Q: what are the effects of inventory errors on the financial statements

A: Incorrect recording of Inventory balance results in the Inventory errors.

Q: TRUE OR FALSE? The increase in the provision for inventory obsolescence is treated as a change in…

A: Accounting policies are the set of principles to be followed in the preparation of financial…

Q: Under IFRS, which of the following methods is not acceptable for the valuation of inventory? a.…

A:

Q: Which of the following is not a reason for the physical inventory count to differ from what…

A: Inventory is one of the important current asset of the business. This can be in form of raw…

Q: Which of the following statements is not true concerning interim financial reporting and…

A: Companies that use the LIFO method may encounter a liquidation of base period inventories at an…

Q: Determine what report (unqualified, qualified, adverse, or disclaimer) is appropriate Your client…

A: Unqualified Opinion with an additional explanatory paragraph

Q: following is accounted for prospectively? Change in reporting entity. Change in…

A: A change in an estimate is accounted for prospectively.

Q: Describe the accounting treatment for a change in inventory method other than to LIFO.

A: Method of Inventory: Inventory refers to the current assets that a company expects to sell during…

Q: Because of increasing profits and inventory prices, the company changed from FIFO to LIFO inventory,…

A: An auditor should provide an unqualified opinion on the financial statements if he believes that the…

Q: Why does reporting income under generally accepted accounting principles “reward building inventory…

A: Generally Accepted Accounting Principles: The Generally Accepted Accounting Principles are a group…

Q: the auditor decided to render analytical procedure in testing the reasonableness of the inventory…

A: The method of retail inventory refers to the accounting process which is used to estimate the…

Q: audit of a client's inventory balance

A: Option a is wrong because the difference may be attributable to the estimate made by the auditor.…

Q: Allowance Method in accounting for inventory write-down

A: Statement I is correct because Allowance method is required to be followed in accounting for…

Q: Explain why errors in the valuation of inventory at the endof the year are sometimes called…

A: The errors in the valuation of ending inventory result in underestimate or overestimate the ending…

Audit Procedures

Audit Procedures are methods and techniques performed by the auditor to determine the quality of financial information of clients, thereby expressing an opinion on true & fair view of financial statements and entity position. They are identified and applied at the planning stage of audit after determining audit objectives, scope, approach, and risk assessment.