Quiz 9.
42:
According to the audit objective stating that all inventory on
hand is reflected in the ending inventory balance, which
management assertion is the auditor most likely testing?
a. The entity has rights to the inventory
b. Inventory is properly valued
c. Inventory is properly presented in the financial statements
d. Inventory is complete
Correct Answer: d. Inventory is complete
Quiz 9.43:
For a portion of the client's inventory located in public
warehouses, which method is the most efficient for acquiring
evidence of the existence of this merchandise?
a. Observation
b. Confirmation
c. Calculation
d. Inspection
Correct Answer: b. Confirmation
Quiz 9.44:
When tracing a sample of inventory tags to a client's
computerized listing of inventory items, the purpose is to
determine whether the inventory items:
a. Represented by tags were included on the listing
b. Included on the listing were properly counted
c. Represented by tags were reduced to the lower of cost or
market
d. Included in the listing were properly valued
Correct Answer: a. Represented by tags were included on the
listing
Quiz 9.46 - Test of Controls:
Identify the assertion being addressed for each procedure:
Balance and reconcile detailed production cost sheets to
work-in-process inventory control account.
Assertion: Completeness
Scan closed production cost sheets for missing numbers in the
sequence.
Assertion: Completeness
Vouch a sample of open and closed production cost sheet
entries to (a) labor reports and (b) issue forms and materials
used reports.
Assertions: (a) Existence/Occurrence; (b)
Existence/Occurrence
Locate the material issue forms and determine whether they
are (a) prenumbered (b) kept in a secure location, and (c)
available to unauthorized persons.
Assertions: (a) Completeness; (b) Existence/Occurrence; (c)
Existence/Occurrence
Select several summary journal entries in the work-in-process
inventory and (a) vouch them to weekly labor and material
reports and to production cost sheets and (b) trace them to
the control account.
Assertions: (a) Existence/Occurrence; (b) Classification
Select a sample of the material issue forms in the production
department file and examine them for:
a. Issue date and materials used report date
b. Production order number
c. Floor supervisor's signature or initials
d. Name and number of material
e. Raw materials stores clerk's signature or initials
f. Material requisition in raw materials stores file, noting the
date of the requisition
Assertions: a. Cut-off/Valuation-Allocation; b. Completeness;
c. Existence/Occurrence; d. Accuracy; e. Accuracy/Valuation-
Allocation; f. Cut-off/Valuation-Allocation
Determine by inquiry and inspection whether cost clerks d. Reconciliation of work-in-process inventory with periodic
review dates on reports of units completed for accounting in cost budgets
the proper period.

Assertions: Cut-off; Valuation/Allocation; Completeness

Correct Answer: a. Use of time tickets to record actual labor
worked on production orders

Quiz:

An auditor generally tests the segregation of duties related to

inventory by:

a. Test counts and cutoff procedures

b. Document inspection and reconciliation

c. Analytical procedures and invoice recomputation

d. Personal inquiry and observation

Correct Answer: d. Personal inquiry and observation

Quiz:

While observing a client's annual physical inventory, an

auditor recorded test counts for several items and noticed
that certain test counts were higher than the recorded
quantities in the client's perpetual records. This situation
could be the result of the client's failure to record:

a. Sales returns

b. Purchase discounts

c. Sales

d. Purchase returns

Correct Answer: a. Sales returns

Quiz:

Which of the following internal controls most likely would

prevent direct labor hours from being charged to
manufacturing overhead?

a. Use of time tickets to record actual labor worked on

production orders

b. Periodic independent counts of work-in-process for

comparison to recorded amounts

c. Comparison of daily journal entries with approved

production orders