Assertion and Related Inventory Transactions

Question 1

Occurrence - Inventory transferred to inventory department using an approved, pre-numbered receiving report

Answer 1

Review and test procedures for the transfer of inventory

Question 2

Occurrence - Inventory transferred to manufacturing using renumbered materials requisitions

Answer 2

Review and test procedures for issuing materials to manufacturing departments

Question 3

Occurrence - accounting for numerical sequence of materials requisitions

Answer 3

Review and test client procedures for account for numerical sequence of materials requisitions

Question 4

Occurrence - Physical safeguards over inventory

Answer 4

Observe the physical safeguards over inventory

Question 5

Completeness - Accounting for numerical sequence of purchase orders, receiving reports, and vouchers

Answer 5

Review client’s procedures for accounting for numerical sequence of purchase orders, receiving reports, and vouchers

Question 6

Completeness - Receiving reports matched to vendor invoice and entered in the purchases journal

Answer 6

Trace a sample of receiving reports to their respective vendor invoices and vouchers. Trace a sample of vouchers to the purchases journal.

Question 7

Completeness - Procedures to include goods out on consignment and exclude goods held on consignment

Answer 7

Review and test client’s procedures for consignment goods

Question 8

Authorization - Preparation and review of authorized purchase or production schedules

Answer 8

Review authorized production schedules

Question 9

Authorization - Use of material requirements planning and/or just-in-time inventory systems. Review of inventory levels by design department.

Answer 9

Review and test procedures for developing inventory levels and procedures used to control them

Question 10

Accuracy - Periodic or annual comparison of goods on hand with amounts shown in perpetual inventory records

Answer 10

Review and test procedures for taking physical inventory

Question 11

Accuracy - Standard costs that are reviewed by management

Answer 11

Review and test procedures used to develop standard costs

Question 12

Accuracy - Review of cost accumulation and variance reports

Answer 12

Review and test cost accumulation and variance reports

Question 13

Accuracy - Inventory management personnel review inventory for obsolete, slow-moving, or excess quantities

Answer 13

Review and test procedures for identifying obsolete, slow-moving, or excess quantities

Question 14

Accuracy - Perpetual inventory records reconciled to general ledger control account monthly

Answer 14

Review the reconciliation of perpetual inventory to general ledger control account.

Question 15

Cutoff - All receiving reports processed daily by the IT department to record the receipt of inventory

Answer 15

Review and test procedures for processing inventory included on receiving reports into the perpetual records

Question 16

Cutoff - All shipping documents processed daily to record the shipment of finished goods

Answer 16

Review and test procedures for removing inventory from perpetual records based on shipment of goods

Question 17

Classification - Materials requisitions and production data forms used to process goods through manufacturing

Answer 17

Review the procedures and forms used to classify inventory