acct 241 ch 9

Inventory should be recorded when
A. When the related revenue is recognized
B. the company has title to it
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. sales forecast
C. purchase order
D. production plan

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

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. valuation or accuracy
B. completeness
C. occurrence
D. rights and obligations

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

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

Tracing a test count to the inventory compilations provides evidence for which ASB balance assertions?
A. existence
B. valuation
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. the employee's supervisor
D. personnel

The record where the employee's income taxes payable are recorded is the
A. payroll register
B. clearing account
C. personnel files
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. prepetual inventory records are maintained only for items of significant value
C. the warehouse manager is responsible for maintance of perpetual inventory records
D. the cycle basis is used for physical counts

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. maintain a perpetual inventory of only the more valuable items with frequent periodic verification of the accuracy of the perpetual inventory record
C. have separate warehouse space for the more valuable items with frequent periodic physical counts and comparison to perpetual inventory reocrds

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. not obsolete
B. physically present at the time of the final invetory schedule
C. owned by the client
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. 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
B. no journal entry had been made on the retailer's books for several items returned to its suppliers
C. credit memos for several items returned by customers had not been recorded
D. 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

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. accurate perpetual inventory records are maintained
C. inventory is slow moving
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. receiving reports are pre numbered and the numbering sequence is checked periodically
B. employees responsible for custody of finished goods do not perform the receiving function
C. there is a separation of duties between the payroll department and inventory accounting personnel
D. the work in process account is periodically reconciled with subsidiary inventory records

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

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. request the client to schedule the physical inventory count at the end of the year
C. increase the extent of tests of controls relevant to the inventory cycle
D. apply gross profit tests to ascertain the reasonableness of the physical counts

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. valuation
B. existence or occurence
C. rights and obligations
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. inspect agreements to determine whether any inventory is pledged as collateral or subject to any liens
B. trace test counts noted during the entity's physical count to the entity's summarization of quantities
C. select the last few shipping advices used before the physical count, and determine whether the shipments were recorded as sales
D. inspect the open purchase order file for significant commitments that should be considered for disclosure

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

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

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. vouching cancelled checks to federal tax form 941
B. multiplication of the applicable FICA rate by the individual gross taxable earnings
C. Utilizing form W-4 and withholding charts to determine whether deductions authorized per pay period agree with amounts per pay period
D. Footing and cross-footing the payroll register followed by tracing postings to the general ledger

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. internal controls relating to payroll disbursements are operating effectively
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. only bona fide employees worked and their pay was properly conmputed

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

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. prevent the paymaster from cashing checks that are unclaimed for several weeks
B. assure that employees who were absent on a payroll distribution day are not paid for that day
C. prevent a bona fide employee's check from being claimed by another employee
D. detect any fictitious employee who may have been placed on the payroll