Inventory and Production Cycle

Question 1

What is the inventory and production cycle?

Answer 1

1. Receiving bay
   A2. Raw materials warehouse
   A3. Production department
   A4. Finished goods warehouse
   A5. Dispatch
   B2. Inventory for resale warehouse
   B3. Dispatch

Question 2

What is the inventory and production cycle?

Answer 2

1. Receiving bay
   A2. Raw materials warehouse
   A3. Production department
   A4. Finished goods warehouse
   A5. Dispatch
   B2. Inventory for resale warehouse
   B3. Dispatch

Question 3

How should inventory be recognised?

Answer 3

At the lower of cost or net realisable value

Question 4

At what cost should imported inventories be valued at?

Answer 4

The spot rate (the exchange rate relevant to the transaction date)

Question 5

What type of test is an auditor attending a stock count?

Answer 5

Both a test of internal controls and a substantive procedure

Question 6

When are early verification procedures executed?

Answer 6

When the auditor has insufficient time to gather enough audit evidence. The procedures will then roll forward at year-end.