Tests for Rights and Obligations

• The auditor is concerned about what type of

inventory?

• What type of test?

• Consigned –in:

• Consigned –out: Inventory 1

Tests for Presentation and Disclosure
• What document should be examined here?
• The financial statements

Inventory 2
Interrelationship of Various Audit Tests

Tests of acquisition and Tests of payroll and

payments cycle personnel cycle
Work in process
Raw materials

Beginning inventory
Beginning inventory
+
+
Acquisitions of raw
Direct labour
materials
+
-
Raw material used
Ending inventory
+
=
Indirect labour and
Raw material used
other manufacturing
overhead
-
Ending inventory
=
Tests of cost accounting: Cost of goods Finished goods
Perpetual inventory manufactured
records
Unit cost records

Beginning inventory
+
Cost of goods
manufactured
Tests of physical -
inventory observation Ending inventory
=
Compilation and Cost of goods sold
pricing

Tests of sales and

collection cycle

Inventory 3