AUD 3 Internal Control 17 - 2 Operating Cycles - Production and Conversion Cycle Flashcards
Production and Conversion Cycle
The production and conversion cycle deals with manufacturing operations.
Most of the controls are similar to those in the purchasing and spending cycle, since inventory may be involved in both cycles, the difference being whether they were manufactured or purchased.
Acquisition of, and accounting for, raw materials purchased in a manufacturing process would be similar to merchandise inventory in a nonmanufacturing entity.
Examples of controls related to the management assertions for manufactured inventory include:
- Presentation and Disclosure
- Existence or Occurrence
- Completeness and Cutoff
- Valuation, Allocation and Accuracy
Production and Conversion Cycle
The production and conversion cycle deals with manufacturing operations.
Most of the controls are similar to those in the purchasing and spending cycle, since inventory may be involved in both cycles, the difference being whether they were manufactured or purchased.
Acquisition of, and accounting for, raw materials purchased in a manufacturing process would be similar to merchandise inventory in a nonmanufacturing entity.
Examples of controls related to the management assertions for manufactured inventory include:
- Presentation and Disclosure
- Existence or Occurrence
- Completeness and Cutoff
- Valuation, Allocation and Accuracy
Production and Conversion Cycle
Examples of controls related to the management assertions for manufactured inventory include:
- Presentation and Disclosure
- Existence or Occurrence
- Completeness and Cutoff
- Valuation, Allocation and Accuracy
• Presentation and Disclosure
– Direct labor charged to individual time tickets is compared to the total direct labor charged to work-in-process, in order to ensure direct labor costs have not been charged to manufacturing overhead.
• Existence or Occurrence
– Perpetual inventory records are compared with goods on hand.
• Completeness and Cutoff
– Forms used for material requisitions are prenumbered and periodically accounted for.
• Valuation, Allocation and Accuracy
– Subsidiary records are periodically reconciled to inventory control accounts.
Production and Conversion Cycle
Examples of controls related to the management assertions for manufactured inventory include:
- Presentation and Disclosure
- Existence or Occurrence
- Completeness and Cutoff
- Valuation, Allocation and Accuracy
• Presentation and Disclosure
– Direct labor charged to individual time tickets is compared to the total direct labor charged to work-in-process, in order to ensure direct labor costs have not been charged to manufacturing overhead.
• Existence or Occurrence
– Perpetual inventory records are compared with goods on hand.
• Completeness and Cutoff
– Forms used for material requisitions are prenumbered and periodically accounted for.
• Valuation, Allocation and Accuracy
– Subsidiary records are periodically reconciled to inventory control accounts.
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated to determine if inventories have been pledged as collateral.
• Allocation and Valuation
– Allocations of salaries and wages to inventory are reviewed to make certain appropriate amounts are included.
• Completeness
– Forms used for the acquisition of raw materials and other items are prenumbered and all numbers are accounted for.
• Existence
– Perpetual inventory records are regularly reconciled to goods in inventory to make certain that recorded amounts are still on hand.
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated to determine if inventories have been pledged as collateral.
• Allocation and Valuation
– Allocations of salaries and wages to inventory are reviewed to make certain appropriate amounts are included.
• Completeness
– Forms used for the acquisition of raw materials and other items are prenumbered and all numbers are accounted for.
• Existence
– Perpetual inventory records are regularly reconciled to goods in inventory to make certain that recorded amounts are still on hand.
Production and Conversion Cycle
Using the mnemonic RACE for ac_______ balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account ba_____s:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- R_____ and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and o_________
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- A________ and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and V________
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- C__________
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- E________
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated to determine if inventories have been pledged as collateral.
Production and Conversion Cycle
Using the mnemonic RACE for account balances:
- Rights and obligations
- Allocation and Valuation
- Completeness
- Existence
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated to determine if inventories have been pledged as collateral.
Production and Conversion Cycle
• R______ and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated to determine if inventories have been pledged as collateral.
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated to determine if inventories have been pledged as collateral.
Production and Conversion Cycle
• Rights and o_______
– Terms of notes, lines of credit, and other debt instruments are evaluated to determine if inventories have been pledged as collateral.
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated to determine if inventories have been pledged as collateral.
Production and Conversion Cycle
• Rights and obligations
– Te__s of notes,
Production and Conversion Cycle
• Rights and obligations
– Terms of notes,
Production and Conversion Cycle
• Rights and obligations
– Terms of n___s, lines of credit,
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit,
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, l___s of credit, and other debt instruments
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of cr__it, and other debt instruments
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other d__t instruments
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt ins________s are evaluated
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are ev_____ed to determine
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated to determine
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated
to det_______ if inventories have been pledged as collateral.
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated
to determine if inventories have been pledged as collateral.
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated
to determine if in______es have been pledged as collateral.
Production and Conversion Cycle
• Rights and obligations
– Terms of notes, lines of credit, and other debt instruments are evaluated
to determine if inventories have been pledged as collateral.