21) a/ 1. Completeness 2. Accuracy 3. Posting & Summarization 4. Occurrence 5. Classification 6. Timing 7. Completeness & Timing 8. Accuracy 9. Completeness 10.

Classification b/ 1. By only allow to purchases from pre-approved vendors, it guaranty the goods quality and minimize the damage of the purchase. 2. Reducing the risk of misuse inventory and to have adequate information about the inventory turnover rate. 3. It automatically updates the quantity of the on hand inventory to the system. Hence, it minimizes the possibility of miscounting the amount of perpetual inventory. 4. By only allowed authorized inventory warehousing personnel, it strengthens the security to the warehousing, more accessible to keep track of the inventorys records. 5. It avoids the misplacing goods and minimizes the chance of losses caused by theft. 6. It decreases the risk of unmatched inventorys quantity compare to the listings quantity and helps the company to maintain proper records for the warehouse. 7. It updates the records weekly and maintains an adequate tracking for the records. 8. It ensures the inventorys quantity on a weekly basis. 9. It reduces the chance of misstatement for the records and strengthens the security, accurateness for the perpetual inventory system. 10. It safeguards the quality and quantity of the inventory before shipping. c/ 1. 2. 3. 4. Review the documents, purchase order and records Examine the warehouses document and inventory quantity Review the shipping document and compare the shipping quantity to on hand inventory Create a badge, password for authorized employees to access the inventory warehouse. Review the record of people who enter the warehouse and compare it to the list of authorized employees. Reconstruct the storing operation Examine the warehouse records and sampling procedure Inquiry people who responsible for testing and counting the inventory quantity and prepare the warehouse records. Review the accurateness of the systems

5. 6. 7. 8.

9. Review the receiving report and examine its validation. 10. Conduct a recheck to ensure that the inventory is separate properly 23) a/ 1. 2. 3. 4. 5. 6. 7. b/ 1. 2. 3. 4. 5. 6. 7. 24) a/ 1. Review the cost in the inventory invoice and compare with the inventory 2. Examine the sales invoice of the subsequent year and the last shipment records. 3. Conduct a counting for physical inventory and review the records that prepared by the responsible employees. 4. 5. Review the perpetual records and compare it with the raw materials unit price 6. Ensure the obsolete inventory items have an adequate classification 7. Review the control of manufacturing overhead rate with manufacturing overhead costs. b/ 1. Review vendor invoice to assure the appropriateness of cost 2. Examine the shipping records 3. Review the perpetual inventory master file and conduct a quantity check for the inventory at year end. 4. Examine the tags that included in the inventory physical evaluation 5. Check the record for the perpetual inventory and compare it to the master file records. 6. Examine the obsolete inventory items and conduct an inventory physical count Examine the degree of validation for the physical inventory. Ensure the accuracy of the inventory base on its sequence and tags Review the inventory quantity Check the compilation of final inventory Examine if the price per unit of each inventory matches with the vendors invoice Examine the level of authorized for issuing raw material Ensure the quantity of finished good is matched with record in master file. Substantive test Substantive test Substantive test Test of control Test of control Substantive test Substantive test and Test of Control

7. Evaluate the cost of manufacturing overhead and manufacturing overhead rate that applied to the inventory 31) a/ Misstatement amounts ($): 1. Woods: 920 x 0.12 = 110.4 Metal-cutting tools: 49 x 30 = 1470 Cutting fluid: 26 x 40 = 1040 Sandpaper: 600 x 0.95 = 570 2. Check the price list 3. 4. Pg # 14: 2375.30 Pg # 82: 6421.18 b/ Recognized the causes and effects of these misstatements Conduct a follow up procedure to test the accuracy In testing the accuracy, it includes the examination for the appropriateness of counting amount and the calculation errors. Through conducting a sampling test, the auditor can identify the level of accuracy

c/ In order to prevent the misstatement errors, the internal controls and procedures could use the following suggestions: Segregation of duties and appoint an employee that is authorized to recording the transactions To ensure the adequate quantity for inventory, the company should use the automatic system Examine the price, cost approach, inventorys balance record at year end To reduce the footing errors, ensure the inventory tags are allocated properly