Chap 9 10 11 12

Chap 9 10 11 12 - SOLUTIONS FOR MULTIPLE-CHOICE QUESTIONS...

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SOLUTIONS FOR MULTIPLE-CHOICE QUESTIONS 9.34 a. Incorrect This is a common practice that enhances efficiency. b. Incorrect See answer a. c. Correct The weakness is an improper combination of inventory custody and record keeping responsibilities. d. Incorrect See answer a. 9.35 a. Incorrect See answer a above. b. Incorrect This wouldn't necessarily detect the theft. c. Correct The separate space facilitates security, and the frequent counts enable company personnel to detect shortages in a timely manner. 9.36 a. Incorrect This step would not provide evidence whether the items are owned. b. Incorrect This step would not detect obsolescence. c. Incorrect Ensuring physical presence would require tracing from the listing to inventory tickets. d. Correct If the sample is from the inventory in the physical location, the tracing has the objective of auditing the completeness of the final inventory schedule. 9.37 a. Incorrect This would make the count lower than the perpetual records. b. Correct Unrecorded credit memos means that the returned inventory is not in the perpetual records, thus the recorded amount will be smaller than the amount on hand. c. Incorrect This would make the perpetual records too high. d. Incorrect This would make both the physical count and perpetual records too low. 9.38 a. Incorrect Controls must be strong for the roll-forward to be reliable. b. Correct Auditors rely on accurate perpetual records to maintain an accurate inventory balance during the intervening period between the physical count and the balance sheet date. c. Incorrect Slow moving inventory is easier to roll-forward. d. Incorrect This has nothing to do with when the count should be taken. 9.39 a. Incorrect This step helps ensure existence as well as completeness. Answer c is better. b. Incorrect This ensures goods won't be stolen (existence assertion). c. Correct Checking the numbering sequence on prenumbered receiving reports is a way to detect omission of the recording of inventory received. d. Incorrect These are not incompatible duties that must be separated. 9.40 a. Correct An auditor does not expect all inventories to which the auditee has title to be on hand at the date of the count. Some purchased goods may still be in transit at that time. Also, some inventory may be on consignment or in public warehouses although properly included in the count. 9.41 a. Incorrect This may be done, but the persuasiveness is low because of the weak controls. b. Incorrect NO! Controls are tested when they are strong and can be relied on. c. Correct If control risk is high, a timelier audit procedure may be necessary, and extending the results of work done on an interim basis to year-end might be inappropriate. Thus, observation of inventory at year-end would provide the best evidence as to existence.
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d. Incorrect This can only be done if controls can be relied on. 9.42
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Chap 9 10 11 12 - SOLUTIONS FOR MULTIPLE-CHOICE QUESTIONS...

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