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CHAPTER 14 MULTIPLE CHOICE b1.To strengthen control procedures over the custody of heavy mobile equipment, the client would most likely institute a policy requiring a periodic a. Increase in insurance coverage. b. Inspection of equipment and reconciliation with accounting records. c.Verification of liens, pledges, and collateralizations. d. Accounting for work orders.(AICPA ADAPTED) c2.To improve accountability for fixed asset retirements, management most likely would implement an internal control structure that includes a.Continuous analysis of the repairs and maintenance account. b.Periodic inquiry of plant executives by internal auditors as to whether any plant assets have been retired. c.Continuous utilization of serially numbered retirement work orders. d.Periodic inspection of insurance policies by internal auditors.(AICPA ADAPTED) b3.From the auditor's point of view, inventory counts are more acceptable prior to the year-end, when a.Internal control is deficient. b.Accurate perpetual inventory records are maintained. c.Inventory is slow moving. d.Significant amounts of inventory are held on consignment.(AICPA ADAPTED) c4.Apex Manufacturing Corporation mass produces eight different products. The controller who is interested in strengthening control procedures over the accounting for materials used in production would be most likely to implement a.An economic order quantity (EOQ) system. b.A job order cost accounting system. c.A perpetual inventory system. d.A separation of duties among production personnel. (AICPA ADAPTED) a5.For several years, a client's physical inventory count has been lower than what was shown on the books at the time of the count so that downward adjustments to the inventory account were required. Contributing to the inventory problem could be deficiencies in internal control that led to the failure to record some a.Purchases returned to vendors. b.Sales returns received. c.Sales discounts allowed. d. Cash purchases.(AICPA ADAPTED) a6.When perpetual inventory records are maintained in quantities and in dollars, and internal control procedures over inventory are deficient, the auditor would probably a.Want the client to schedule the physical inventory count at the end of the year. b.Insist that the client perform physical counts of inventory items several times during the year. c.Increase the extent of tests for unrecorded liabilities at the end of the year. d.Have to disclaim an opinion on the income statement that year.(AICPA ADAPTED) 97 Which statement is correct relating to the count of inventory when a company that specializes in taking such counts?Which statement is correct relating to the count of inventory when a company that specializes in taking such counts ("the company") is involved with counting a client's inventory? The auditor should not consider the counts by the company, by themselves, sufficient appropriate audit evidence.
Which of the following audit procedures is best to perform to determine that company legally owns inventories?To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditors should review and test the: Purchase cutoff procedures. Purchase cutoff procedures should be designed to test whether all inventory: Owned by the company was recorded.
Who should maintain the perpetual inventory master files?23) Production personnel should ordinarily be responsible for maintaining perpetual inventory records.
When the auditors Cannot satisfy themselves as to the accuracy of ending inventory?7. When the auditors cannot satisfy themselves as to the accuracy of ending inventory and a material misstatement may exist, they normally may still give an unmodified (unqualified) opinion on the client's income statement.
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When perpetual inventory records are maintained in quantities and in dollars and internal accounting control over inventory is weak the auditor would probably?
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