M4-Inventory Cycle Flashcards
Failure to record sales returns would result in actual inventory quantities being greater than those recorded in the perpetual inventory records. (true or false)
true
The auditor’s personal observation is generally one of the most reliable forms of evidence. Observing physical inventory counts provides reliable evidence that the inventory actually exists. (true or false)
true
As part of the the process of observing a client’s physical inventories, an auditor should be alert to the inclusion of any obsolete or damaged goods, which may need to be written down or written off. (true or false)
true
The auditor should test the physical inventory report by tracing test counts taken by the auditor to the report, thereby verifying its completeness. (true or false)
true
Performing cutoff procedures provides assurance that goods in transit (shipped or received) are appropriately included or excluded form inventory and this procedure is most appropriate for testing the completeness assertion. (true or false)
true
The auditor should observe the physical inventory count of goods held in public warehouses if the inventory held is significant; otherwise, confirmation of such inventory is sufficient. (true or false)
true
Inspecting loan agreements under which an entity’s inventories are pledged provides evidence regarding completeness with respect to presentation and disclosure, since such information must be disclosed in the financial statements. (true or false)
true
An audit objective for inventory valuation and allocation is to determine that slow-moving, excess, defective and obsolete items included in inventory are properly identified. Inquiries of production and sales personnel concerning possible excess or obsolete inventory items would support management’s assertion of valuation and allocation. (true or false)
true
In order to maintain accurate perpetual inventory record, periodic inventory counts should be used to adjust perpetual records. (true or false)
true
