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12 Cards in this Set

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Which of the following is least likely to be among the auditors objectives in the audit of inventories and cost of goods sold
1. determine the evalutaion of inventories and cost of goods sold is arrived at by appropriate methods
2. Determine the existence ofr inventiories and the occurrence of transaction affecting cost of goods sold.
3. Establish that the cdlient includes only inventory on hand at year end in inventory totals
Establish that the client includes only inventory on hand at year-end in inventory totals
The receiving department is least likely to be responsible for the
1. Determination of quantities of oods received.
2. Detection of damaged or defective merchandise.
3. Preparation of a shipping document.
4. Transmittal of goods received to the store department.
Preparation of a shipping document
The document issued by a common carrier acknowledging the receipt of goods and setting forth the provisions of the transportation agreement is the
1.Bill of lading
2.Job time shipping
3. Production Order
4.Production schedule
Bill of lading
.Which of the following should be included as part of inventory costs of a manufacturning company?

Direct Labor Raw Material Factory Overhead
1 Yes Yes Yes
2 Yes No No
3 No Yes No
4 No No No
Direct labor Raw Material Factory overhead
Yes Yes Yes
The organization establisheed by Congress to narrow the options in cost accounting that are avaiable under generally accepted accounting principles is the
1. Cost Accounting Standards Board
2. Financial Accounting Standard Board
3. Public Compay Accounting Oversight Board
4. Securities and Exchange Commision
Cost Accounting Standard Board
When a primary risk related to an audit is possible overstated inventory, The assertaion most directly related is
1. Existence
2. Completeness
3. Clarity
4. Presentation
Existence
Instead of taking a physical inventory count on the balance-sheet date, the client may take Physical counts prior to the year end if internal control is adequate and
1.Well kept records of perpetual inventory are maintained
2. Inventory is slow moving
3. Computer error reports are generated for missing prenumbered inventory tickets
4. Obsolete inventory items are segregated and excluded
Well kept records of perpetural inventory are maintained.
The auditor's analytical procedure will be facilited if the client
1. Uses a standard cost system that produces variance reports
2. Segregates obsolete inventory before the physical inventory count
3. Corrects material weaknesses in internal control before the beginning of the audit.
4. Reduces inventory balances to the lower of cost or martket
Uses a standard cost system that produces variance reports
When perpetual inventory records are maintained in quantities and in dollars, and internal control over inventory is weak the auditior would probably
1. Want the client to schedule the physical inventory count at the end of the year.
2.Insist that the client perform physical counts of inventory items several times during the years
3.Increase the etent of tests for unrecorded liabities at the end of the year.
4. Have to disclaim an opnion on the income statement for the year.
Want the client to schedule the physical inventory count at the end of the year.
Which of the following is the best audit procedure for the discovery of damaged merchndise in a client ending inventory
1. Compare the physical quantities ofr slow moving items with correspondidng quatities in the prior year
2. Observe the merchandise and raw materials during the clients pysical inventory ytaking.
3. Review the management inventory representations letter for accurancy.
4. Test overall fairness of inventory values by comparing the compaies turnover ration with the industry average
Observe merchandise and raw material during the clients physcial inventory taking..
PcPherson COrp does not make an annual physical count of year-end inventories, but isntead makes weekly test counts on the basis of a statistical plan. DUring the year, Sara Mullins, CPA, observes such counts as she sems necesary and is able to satisfy herself as to the reliability of the client;s procedures. In reporting on the results of her examination, Mullins:

1. Can issure an unqualifies opinion without disclosing that she did not observe year-end inventories.
2.Must comment in the scope paragraph as to her inablity to ovserve year-end invetnories, but can nevertheless issue an unqualified opinion.
3. IS required, if the inventories are material, to disclaim an opinion on the financial statements taken as a whole.
4.Must, if the inventories are material, qualify her opinion.
1. Can issure an unqualifies opinion without disclosing that she did not observe year-end inventories
The primary objective of a CPA's observation of a client's physical inventory count is to:

1. Discover whether a client has counted a particular inventory item or group of items.
2. Obtain direct knowledgte that the inventory exists and has been properly counted.
3. Provide an appraisal of the quality of the merchandise on hand on the day of the physical count.
4. Allow the auditor to supervise the conduct of the count in order to obtain assurance that inventroy quanitites are reawsonably accurate.
2. Obtain direct knowledgte that the inventory exists and has been properly counted.