ch12 - Chapter 12 Multiple Choice 1. c 2. d 3. a 4. d 5. c...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 12 Multiple Choice 1. c 2. d 3. a 4. d 5. c 6. b 7. a 8. c 9. b 10. d 11. c 12. b 13. d 14. b 15. b 16. a 17. d 18. a 19. b 20. c 21. c 22. c Discussion Questions 23. In the automotive industry, acquisitions relate to inventory, and audit tests deal with the accumulation and allocation of costs among inventory units. The audit tests distinguish between inventory that is still an asset and that which has been sold and is now included as an expense in cost of sales. These audit risks differ from other industries that only perform service activities. Service businesses typically do not purchase inventory or have product costs. While many exclusively-service businesses exist in other industries, those classified as automotive typically have some type of inventory connected with their service activities. One such example is the sale of parts associated with providing repair services. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
24. Generally, computer assisted audit techniques (CAAT) can be used to verify the integrity of the accounting information systems reports. The procedures below can further address the system’s process controls: a. The auditor should review the receiving department’s electronic ledger of inventory receipts showing the purchase order number, investigate unmatched receipts b. The auditor should review the receiving department’s electronic ledger of inventory receipts showing the purchase order number, and reconcile with the paid check register by vendor showing invoice number and purchase order number. The auditor should then investigate discrepancies. c. The auditor should review the paid check register by vendor showing invoice number and request the check register in electronic format (e.g. Microsoft Excel). The auditor then should sort the invoices to find duplicates. d. The auditor should reconcile the invoice register by individual line item to the purchase order detail to compare amounts and unit prices and then investigate discrepancies. e. The auditor should reconcile the paid check register by vendor (sorted by vendor) to the vendor master file. (AS 2, Example B-4) 25. Some audit program steps to verify the genuine addition of fixed assets include: Vouching all fixed asset additions in a fixed asset roll forward (i.e. a schedule which begins with the prior year’s ending balance, details all additions and deletions and foots to the current year end balance) over a listing scope (i.e. an audit test amount set at a percentage of materiality, in accordance with auditing standards and audit firm protocols) and agree to cash disbursement supporting documents (e.g. check copies, wire transfers, vendor invoices) to verify the actual cash payments for the acquisitions of the assets. Physically inspecting a sample of assets listed as additions on the fixed asset rollforward
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/02/2012 for the course BUSINESS 101 taught by Professor - during the Spring '11 term at Mississippi Valley State University.

Page1 / 10

ch12 - Chapter 12 Multiple Choice 1. c 2. d 3. a 4. d 5. c...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online