acct 241 ch 9

Inventory should be recorded when
A. the company has title to it
B. When the related revenue is recognized
C. when it is received
D. When it is shipped from the vendor

The overall production authorization starts with a
A. bill of materials
B. production plan
C. sales forecast
D. purchase order

Which of the following is not recognized by GAAP as appropriate for determining inventory cost?
A. LIFO
B. Standard costs
C. Weighted average
D. FIFO

The source of authorization for preparation of materials requisitions is
A. bill of materials
B. production plan
C. sales forecast
D. purchase order

Comparing material usage reports to raw material stores issue slips is a control to help insure which ASB transaction assertion?
A. completeness
B. rights and obligations
C. occurrence
D. valuation or accuracy

Responsibility for the physical count lies with the
A. vendor
B. client
C. inventory specialist
D. auditor

Client's inventory instructions should include all the following except
A. plans for controlling movement of goods
B. instructions for auditors' test counts
C. names of client personnel responsible for the count
D. instructions for recording accurate descriptions

Tracing a test count to the inventory compilations provides evidence for which ASB balance assertions?
A. valuation
B. existence
C. completeness
D. presentation and disclosure

Hiring and firing employees is a function that should be performed by
A. cost accounting
B. payroll accounting
C. personnel
D. the employee's supervisor

The record where the employee's income taxes payable are recorded is the
A. personnel files
B. payroll register
C. clearing account
D. labor cost analysis

Which of the following is an internal control weakness for a company whose inventory of supplies consists of a large number of individual items?
A. supplies of relatively little value are expensed when purchased
B. the cycle basis is used for physical counts
C. prepetual inventory records are maintained only for items of significant value
D. the warehouse manager is responsible for maintance of perpetual inventory records

Which of the following procedures would best detect the theft of valuable items from an inventory that consists of hundreds of different items selling for $1 to $10 and a few items selling for hundreds of dollars?
A. have an independent CPA term prepare an internal control report on the effectiveness of the controls over inventory
B. have separate warehouse space for the more valuable items with frequent periodic physical counts and comparison to perpetual inventory reocrds
C. maintain a perpetual inventory of only the more valuable items with frequent periodic verification of the accuracy of the perpetual inventory record

An auditor will usually trace the details of the best counts made during the observation of the physical inventory taking to a final inventory compilation. The audit procedure is undertaken to provide evidence that items physically present and observed by the auditor at the time of the physical inventory count are:
A. owned by the client
B. physically present at the time of the final invetory schedule
C. not obsolete
D. included in the final inventory schedule

They physical count of inventory of a retailer was higher than shown by the perpetual records. Which of the following could expain the difference?
A. credit memos for several items returned by customers had not been recorded
B. Inventory items had been counted, but the tags placed on the items had not been taken off the items and added to the inventory accumulation sheets
C. An item purchased "FOB shipping point" had not arrived at the date of the inventory count and had not been reflected in the perpetual records
D. no journal entry had been made on the retailer's books for several items returned to its suppliers

From the auditor's point of view, inventory counts are not more acceptable prior to the year end when:
A. internal control is weak
B. inventory is slow moving
C. accurate perpetual inventory records are maintained
D. significant amounts of inventory are held on a consignment basis

Which of the following client internal control procedures most likely addresses the completeness assertion for inventory?
A. employees responsible for custody of finished goods do not perform the receiving function
B. receiving reports are pre numbered and the numbering sequence is checked periodically
C. the work in process account is periodically reconciled with subsidiary inventory records
D. there is a separation of duties between the payroll department and inventory accounting personnel

When auditing inventories, and auditor would least likely verify that:
A. the financial statement presentation of inventories is appropriate
B. the client has used proper inventory pricing
C. all inventory owned by the client is on hand at the time of the count
D. damaged goods and obsolete items have been properly accounted for

A client maintains perpetual inventory records in quantities and in dollars. If the assessed level of control risk is high, an auditor would propably:
A. insist the client perform physical counts of inventory items several times during the year
B. increase the extent of tests of controls relevant to the inventory cycle
C. apply gross profit tests to ascertain the reasonableness of the physical counts
D. request the client to schedule the physical inventory count at the end of the year

An auditor selected items for test counts while observing a client's physical inventory. The auditor then traced the test counts to the client's inventory listing. This procedure most likely obtained evidence concerning management's assertion of:
A. rights and obligations
B. valuation
C. existence or occurence
D. completeness

Which of the following audit procedures propably would provide the most reliable evidence concerning the entity's assertion of rights and obligations related to inventories?
A. select the last few shipping advices used before the physical count, and determine whether the shipments were recorded as sales
B. inspect the open purchase order file for significant commitments that should be considered for disclosure
C. inspect agreements to determine whether any inventory is pledged as collateral or subject to any liens
D. trace test counts noted during the entity's physical count to the entity's summarization of quantities

An auditor most likey would analyze inventory turnover rates to obtain evidence concerning management's assertions about:
A. presentation and disclosure
B. existence of occurrence
C. rights and obligations
D. valuation

Effective internal control over the payroll function should include procedures that segregate the duties of making salary payments to employees and:
A. controlling unemployement insurance claims
B. hiring new employees
C. approving employee fringe benefits
D. maintaining employee personnel records

During the year, a bookkeeper perpetrated a theft by preparing erroneous W-2 forms. The bookkeeper's FICA withheld was overstated by $500, and the FICA withheld from all other employees was understated. Which of the following is an audit procedure that would detect such a fraud?
A. multiplication of the applicable FICA rate by the individual gross taxable earnings
B. Footing and cross-footing the payroll register followed by tracing postings to the general ledger
C. Utilizing form W-4 and withholding charts to determine whether deductions authorized per pay period agree with amounts per pay period
D. vouching cancelled checks to federal tax form 941

A common audit procedure in the audit of payroll transactions involves vouching selected items from the payroll journal to employee time cards that have been approved by supervisory personnel. This procedure is designed to provide evidence in support of the audit proposition that:
A. only bona fide employees worked and their pay was properly conmputed
B. on jobs which employees worked, their pay was properly computed
C. all employees worked the number of hours for which their pay was computed
D. internal controls relating to payroll disbursements are operating effectively

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the:
A. operational responsibility from the record keeping responsibility
B. human resources function from the controllership function
C. authroization of transactions from the custody of related assets
D. administrative controls from the internal accounting controls

Which of the following deparments most likely would approve changes in pay rates and deductions from employee salaries?
A. personnel
B. payroll
C. controller
D. treasurer

A large retail enterprise has established a policy the requires the paymaster to deliver all unclaimed payroll checks to the internal audit department at the end of each payroll distribution day. This policy was most likely adopted to:
A. assure that employees who were absent on a payroll distribution day are not paid for that day
B. detect any fictitious employee who may have been placed on the payroll
C. prevent the paymaster from cashing checks that are unclaimed for several weeks
D. prevent a bona fide employee's check from being claimed by another employee