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EBK AUDITING AND ASSURANCE SERVICES
16th Edition
ISBN: 9780134067117
Author: Hogan
Publisher: VST
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Chapter 8, Problem 7RQ
To determine
Explain the manner in which the acquisition of knowledge by the auditor aids in distinguishing between obsolete and current inventory.
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Students have asked these similar questions
An auditor often tries to acquire background knowledge of theclient’s industry as an aid to audit work. How does the acquisition of this knowledge aidthe auditor in distinguishing between obsolete and current inventory?
when the auditor Watch employees count inventory to determine whether company procedures are being followed. What type of evidence he or she is obtaining :
Select one:
a. observation
b. inspection
c. confirmation
d. assurance
e. inquiry
Analyze some common internal controls over inventories. Explain the significant inherent risks associated with inventory. Explain the process of physical inventory counts and the auditor’s observation of this process.
Chapter 8 Solutions
EBK AUDITING AND ASSURANCE SERVICES
Ch. 8 - Prob. 1RQCh. 8 - Prob. 2RQCh. 8 - Prob. 3RQCh. 8 - Prob. 4RQCh. 8 - Prob. 5RQCh. 8 - Prob. 6RQCh. 8 - Prob. 7RQCh. 8 - Prob. 8RQCh. 8 - Prob. 9RQCh. 8 - Prob. 10RQ
Ch. 8 - Prob. 11RQCh. 8 - Prob. 12RQCh. 8 - Prob. 13RQCh. 8 - Prob. 14RQCh. 8 - Prob. 15RQCh. 8 - Your client, Harper Company, has a contractual...Ch. 8 - Prob. 17RQCh. 8 - Prob. 18RQCh. 8 - Prob. 19RQCh. 8 - Prob. 20RQCh. 8 - Prob. 21RQCh. 8 - Prob. 22RQCh. 8 - Prob. 23RQCh. 8 - Prob. 24RQCh. 8 - Prob. 25.1MCQCh. 8 - Prob. 25.2MCQCh. 8 - Prob. 25.3MCQCh. 8 - Prob. 26.1MCQCh. 8 - Prob. 26.2MCQCh. 8 - Prob. 26.3MCQCh. 8 - Which one of the following statements is correct...Ch. 8 - Prob. 27.2MCQCh. 8 - Prob. 27.3MCQCh. 8 - Prob. 28.1MCQCh. 8 - Prob. 28.2MCQCh. 8 - Prob. 28.3MCQCh. 8 - Prob. 29DQPCh. 8 - Prob. 30DQPCh. 8 - Prob. 31DQPCh. 8 - Your comparison of the gross margin percent for...Ch. 8 - Prob. 33DQPCh. 8 - Prob. 34DQPCh. 8 - Prob. 35DQPCh. 8 - Prob. 36DQPCh. 8 - Prob. 37DQPCh. 8 - Following are statements of earnings and financial...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- How might an auditor effectively use preliminary analytical procedures in the audit of various expense accounts, such as miscellaneous expenses? How might this enable the auditor to better understand the business and its environment? How do computer-assisted procedures impact this audit?arrow_forwardThe 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?arrow_forwardAnalyze some common internal controls over inventories. Explain the significant inherent risks associated with inventory. Explain the process of physical inventory counts and the auditor’s observation of this process. Describe common substantive procedures used to audit a client’s property, plant, and equipment. How is depreciation audited? How are intangible assets audited?arrow_forward
- How does inventory control deficiencies affect the development of audit procedures for inventories?arrow_forwardWhen auditing inventories, an auditor would least likely verify thata. All inventory owned by the client is on hand at the time of the count.b. The client has used proper inventory pricing.c. The financial statement presentation of inventories is appropriate.d. Damaged goods and obsolete items have been properly accounted for.arrow_forwardWhich of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?a. The entity has rights to the inventory.b. Inventory is properly valued.c. Inventory is properly presented in the financial statements.d. Inventory is completearrow_forward
- Your audit client is under intense pressure to meet an earnings target. Which transaction assertion for purchases is most at risk. Occurrence Accuracy Completeness Classificationarrow_forwardHow might preliminary analytical procedures enable the auditor to better understand the business and its environment?arrow_forwardAs 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 abovearrow_forward
- What is the primary purpose of analytical procedures performed during the planning stages of the audit? Please identify the warning signs that were revealed about the inventory balance during analytical procedures that were ignored by the auditors.arrow_forwardAs 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 only concern was the difference between your expectation and the client’s financial statements which come in the form of using the gross profit method of estimating inventory as against the client reported balance which is below audit materiality level for audit of inventory. What is the best choice to 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 an unqualified opinionarrow_forwardMULTIPLE CHOICE: 1. Which of the following is not one of the independent auditor’s objectives regarding the audit of inventories? A. Verifying that the client has used proper inventory pricing B. Verifying the inventory counted is owned by the client C. Ascertaining the physical quantities of inventory on hand D. Verifying that all inventory owned by the client is on hand at the time of the count 2. A client maintains perpetual inventory records in both quantities and pesos. If the assessed level of control risk is high an auditor will probably A. Increase the extent of tests of controls relevant to the inventory cycle B. Request the client to schedule the physical inventory count at the end of the year C. Insist that the client perform physical counts of inventory items during the year D. Apply gross profit tests to ascertain the reasonableness of the physical counts 3. To ascertain whether inventories included in the statement of financial position physically exist, a CPA will…arrow_forward
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