Ch 12 - Inventory & COGS

Question 1

An internal control narrative indicates that an approved voucher is required to support every check request for payment of merchandise. Which of the following procedures provides the greatest assurance that this control is operating effectively?

Answer 1

Select and examine canceled checks and ascertain that the related vouchers are dated no later than the checks.

Question 2

Auditors may choose not to confirm accounts payable because:

Answer 2

Other reliable external evidence to support the balances is likely to be available.

Question 3

A receiving department compares inventory items received with copies of purchase orders. The purchase orders list the name of the vendor and do not list the quantities of the material ordered. Using the purchase orders, the receiving department is most likely to detect:

Answer 3

Deliveries for which no purchase order was issued.

Question 4

To determine that each voucher is submitted and paid only once, when a payment is approved, supporting documents should be canceled by the:

Answer 4

Individual who signs the checks.

Question 5

A client uses a perpetual inventory system. Would one expect a credit to which of the following accounts at the point of sale?

Answer 5

Sales- Yes, Inventory - Yes

Question 6

Inventory is _______ (material/immaterial) & __________ (objective/subjective)

Answer 6

Material & Subjective

Question 7

Inventory fraud risks (including financial reporting fraud & misappropriation) are ________ (high/low).

Answer 7

High