L16 notes_Part_5 - if inventory is kept in a public...

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© W.R. Knechel Inventory Analysis- Price Tests (P i ) B. Price Tests (GAAP, consistently applied, write downs-obsolescence) 1. What are valuable controls reducing the extent of price tests (std. cost records, perpetual inventory) 2. Determine method used. Is it GAAP and consistently applied? 3. How are freight, storage, discounts etc. handled? Is it consistent? 4. How might statistical sampling be applied? objectives, sample unit, error conditions, ARIA, tolerable misstatement, avg. % of error assumption 5. should never be recorded above Net realizable value C. Compilation 1. Foot inventory listing for raw material, work in process and finished goods 2. Extend quantity and price on a test basis 3. Trace totals to the General Ledger D. Other issues If inventory is used as collateral or is pledged, this will need to be disclosed. If purchase commitments have resulted in a loss, then this must be disclosed
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Unformatted text preview: if inventory is kept in a public warehouse, confirm with custodian E. Analytical review GM% Inventory Turnover Units costs of prior years inventory ending balances W.R. Knechel Inventory in a Manufacturing Concern Physical Flow: Finished Raw Materials WIP Inventory Goods Inventory Beg. Inventory Beg. Inventory Beg. Inventory Purchases Transfers Out Transfers In Transfers In Mfg. O/H Labor Transfers Out CGS Ending Inventory Ending Inventory Ending Inventory Total O/H (Supply Chain & Procurement Process) Direct Labor Hours (Human Resources Process) Or Total O/H Machine Hours (tie to machine usage reports) Beginning Inventory was audited last year Purchases (Supply Chain &: Procurement Process Labor (Human Resources process) Cost of Goods Sold (Supply Chain & Procurement process Ending Inventory RM, WIP, and FG (Physical examination)...
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L16 notes_Part_5 - if inventory is kept in a public...

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