Site MapHelpFeedbackMultiple Choice
Multiple Choice
(See related pages)



1

Which of the following is not an inherent risk factor in the audit of the inventory management process?
A)Technology changes.
B)Materials requisitions are not pre-numbered.
C)Industry competition.
D)Raw materials are acquired from related parties.
2

Which of the following is an issue related to the valuation internal control objective for inventory?
A)Inventory transactions not properly classified among raw materials, work in process, and finished goods.
B)Inventory transactions not posted to perpetual inventory records.
C)Ensure that consigned goods not included in inventory.
D)Inventory obsolescence.
3

When auditing inventory at year-end, the auditor performs a purchases cut-off test to obtain evidence that:
A)All goods purchased before year-end are received and included in the physical count.
B)No goods observed during the physical count are pledged as collateral.
C)All goods legally owned at year-end are included in the final inventory balance.
D)No goods were held on consignment at year-end.
4

A decrease in inventory turnover that is not consistent with the change in sales may signal to the auditor:
A)An overstatement of ending inventory
B)The existence of many open purchase orders
C)A change from FIFO to LIFO (assume prices are increasing)
D)Duplicate payments on inventory orders
5

After accounting for a sequence of inventory tags, an auditor traces a sample of tags to the physical inventory listing to obtain evidence that the all items:
A)Represented by inventory tags are actual inventory owned by the client (Rights & Ownership).
B)Included on the inventory listing have been counted.
C)Represented by inventory tags are included in the client's inventory balance (Completeness).
D)Included in the listing are represented by inventory tags (Existence).
6

Observing the physical inventory count tests the audit objective of:
A)Validity.
B)Accuracy.
C)Valuation.
D)Ownership.
7

A client maintains perpetual inventory records in terms of both quantities and dollar amounts. If the assessed level of control risk is high, the auditor would probably:
A)Insist that the client take a physical count of inventory at least 4 times a year.
B)Request that the client take the physical count on or very near year-end.
C)Significantly increase the test of controls in the inventory & warehousing area.
D)Rely on analytical procedures (i.e. gross profit test; inventory turnover to ascertain the reasonableness of the physical count.
8

Which of the following control procedures would be most effective in maintaining accurate perpetual inventory records?
A)Independent matching of purchases orders, receiving reports, and vendor invoices prior to payment.
B)Independent count of goods received by storeroom personnel
C)Periodic independent reconciliation of inventory control account with the subsidiary detailed records.
D)Periodic independent reconciliation of perpetual records with actual goods on hand.
9

While observing a client's annual inventory, an auditor recorded test counts for several inventory items and noticed that certain test counts were higher than recorded quantities in the client's perpetual records. This situation could be the result of the client's failure to record:
A)Purchase returns.
B)Sales returns.
C)Sales.
D)Either sales or purchase returns.
10

Key segregations of duties in the inventory management process include separation of all of the following except:
A)Inventory management from cost accounting.
B)Cost accounting from the general ledger function.
C)Supervision of physical inventory from inventory management.
D)Cost accounting from review of variance reports.





To learn more about the book this website supports, please visit its Information Center.
(c)2006 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


Auditing and AssurancesOnline Learning Center with Powerweb

Home > Chapter 13 > Multiple Choice Quiz