chapter 9

Question 1

An auditor usually traces the details of the test counts made during the observation of physical inventory counts to a final inventory compilation. This audit procedure is undertaken to provide evidence that items physically present and observed by the auditor at the time of the physical inventory count are:

a. Not obsolete
b. Owned by the client
c. Physically present at the time of the preparation of the final inventory schedule
d. Included in the final inventory schedule

Answer 1

d. Included in the final inventory schedule

Question 2

An auditor would vouch inventory on the inventory status report to the vendor’s invoice to obtain evidence concerning management’s balance assertions about

a. Completeness
b. Valuation
c. Rights and obligations
d. Existence

Answer 2

b. Valuation

Question 3

If an auditor wants to use analytical procedures to test COGS, which of the below procedures would be least appropriate?

a. Compare ratios to competitor averages
b. Compare ratios to industry averages
c. Compare ratios to prior years
d. Compare ratios to ratios from other audit areas (allowance for doubtful accounts)

Answer 3

d. Compare ratios to ratios from other audit areas (allowance for doubtful accounts)

Question 4

When are analytical procedures not required according to PCAOB standards?

a. During planning
b. During tests of the allowance for doubtful accounts
c. During wrap-up
d. Never

Answer 4

b. During tests of the allowance

Question 5

3. When testing whether a company has consistently used FIFO as its inventory costing method, which assertion is being tested?

a. Existence
b. Completeness
c. Valuation/Accuracy
d. Presentation/Disclosure

Answer 5

c. Valuation/Accuracy

Question 6

If an auditor counts some inventory from the floor of the warehouse and traces it to the inventory listing which assertion is being tested?

a. Valuation/Accuracy
b. Completeness
c. Existence
d. Presentation/Disclosure

Answer 6

b. Completeness

Question 7

If an auditor counts some inventory from the inventory listing and finds it and counts in on the floor of the warehouse which assertion is being tested?

a. Valuation/Accuracy
b. Completeness
c. Existence
d. Presentation/Disclosure

Answer 7

c. Existence

Question 8

As an auditor tours the warehouse, she notices some obsolete/broken items in a corner. By ensuring that these items are excluded/discounted from the inventory listing she is testing which assertion?

a. Valuation/Accuracy
b. Completeness
c. Existence
d. Presentation/Disclosure

Answer 8

a. Valuation/Accuracy

Question 9

If an auditor selects from the inventory listing a sample of items and verifies correct pricing per the master pricing list which assertion is being tested?

a. Valuation/Accuracy
b. Completeness
c. Existence
d. Presentation/Disclosure

Answer 9

a. Valuation/Accuracy