Question 1

When reviewing accumulated depreciation, the auditor seeks evidence as to the reasonableness, consistency and accuracy of depreciation charges. The substantive procedurperformed seek to provide evidence for which assertion?
A) valuation.
B) completeness.
C) rights and obligations.
D) presentation and disclosure.

Accepted Answer

The auditor's review of accumulated depreciation and performance of substantive procedures to obtain evidence on reasonableness, consistency and accuracy of depreciation charges is aimed at supporting the valuation assertion related to property, plant, and equipment.

Question 2

List the procedurthat should be adopted in a physical inventory count.

Accepted Answer

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Question 3

When performing tests of details of balancfor property, plant, and equipment, it is necessary for the auditor to review accumulated depreciation. Discuss what this review entails.

Accepted Answer

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Question 4

In a typical audit, verification of the ownership of plant and equipment is least likely to involve examination of:
A) the physical characteristics of the items
B) "paid invoices".
C) registration certificates.
D) property tax bills.

Accepted Answer

Verification of ownership typically involves examining documents that legally prove ownership, such as registration certificates and property tax bills, or financial transactions like paid invoices. The physical characteristics of items, while important for other aspects of an audit, are less directly related to verifying ownership.

Question 5

For each of the following potential misstatements for inventories, identify a necessary control: Failure to record goods received Unreliable count procedurduring a physical inventory count Inappropriate basis for determining inventory costs Unauthorized removal of goods from inventory Insufficient extent of comparison between physical inventory count and inventory records Inadequate investigation and correction of differencbetween inventory count and inventory records

Accepted Answer

The answer of For each of the following potential misstatements...

Question 6

Evidence concerning the pledging of property, plant, and equipment assets is likely to be obtained through:
A) review of the board minutes.
B) confirmation of debt agreements.
C) inquiries of management.
D) all of the above.

Accepted Answer

All of the options listed could provide evidence concerning the pledging of property, plant, and equipment assets. Reviewing board minutes could reveal discussions of pledging or borrowing against assets, while confirmations of debt agreements would explicitly state any pledged assets. Inquiries of management may also uncover information about any existing pledges or plans to pledge assets. Therefore, all three options would be useful in obtaining evidence about pledged assets.

Question 7

Matters that should be considered by the auditor before reaching a conclusion about the reliability of an inventory count include all of the following except:
A) the type of accounting package used by the firm.
B) the general condition of the inventory.
C) departures from the entity's inventory count.
D) all of the above should be considered

Accepted Answer

The type of accounting package used by the firm is not relevant to the auditor's assessment of the reliability of an inventory count. However, the general condition of the inventory and departures from the entity's inventory count are important factors to consider. Therefore, option D is incorrect as it states that all of the above should be considered.

Question 8

When conducting tests of details of transactions for property, plant, and equipment, there are three typof transactions that need to be substantiated. These transactions are additions, disposals and repairs and maintenance. Briefly describe what is involved with substantiating each of these typof transactions.

Accepted Answer

The answer of When conducting tests of details of transactions...

Question 9

The application of analytical procedurto the audit of inventoriis often:
A) not very useful.
B) the only procedure necessary.
C) a requirement of the standards.
D) used extensively.

Accepted Answer

The application of analytical procedures to the audit of inventories is commonly used by auditors to support audit assertions, assist in identifying misstatements, and provide an overall understanding of the client's financial performance. While it may not be the only procedure necessary, it is often used extensively in the audit process. Additionally, analytical procedures are required by auditing standards to be performed during the planning and the overall review stages of the audit.

Question 10

ABC Ltd is a retailer who is planning to undertake a full inventory count at year-end. Control risk over inventory records for this entity is deemed to be:
A) important due to the timing of the inventory count.
B) important due to the nature of the business.
C) unimportant due to the timing of the inventory count.
D) none of the above.

Accepted Answer

The answer of ABC Ltd is a retailer who is...

Question 11

Describe the audit process for property, plant, and equipment transactions, indicating the audit risks that need to addressed and the mitigating controls that can be implemented.

Accepted Answer

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Question 12

When an asset is shown on the financial report other than at cost, which of the following is not required to be disclosed?
A) the evidence gathered to support the valuation.
B) the year and basis of valuation.
C) whether it is an internal or independent valuation.
D) the name of the valuer.

Accepted Answer

The answer of When an asset is shown on the...

Question 13

What procedurmight be useful to the auditor in determining if all disposals of property, plant, and equipment have been recorded? What procedurwould be adopted by the auditor to gather evidence on the reasonableness, consistency and accuracy of depreciation charg(expense)?

Accepted Answer

The answer of What procedurmight be useful to the auditor...

Question 14

Cyclical inventory counts differ from full inventory counts in which way?
A) cyclical inventory counts are performed at balance date.
B) cyclical inventory counts are only performed by internal audit.
C) cyclical inventory counts may involve counting only a portion of inventory items
D) they differ in all of the above ways

Accepted Answer

Cyclical inventory counts may involve counting only a portion of inventory items, while full inventory counts involve counting all inventory items. The other options (A and B) are incorrect and do not accurately describe the difference between cyclical and full inventory counts.

Question 15

What are the three audit strategy options that an auditor has for verifying the existence (and completeness) of inventoriand what is the implication of each strategy for control risk?

Accepted Answer

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Question 16

Generally, what is the assessment of control risk for transactions relating to property, plant, and equipment? Generally, what is the assessment of materiality in relation to property, plant, and equipment? Briefly discuss the assessment of inherent risk in relation to property, plant, and equipment.

Accepted Answer

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Question 17

List the four separate functions of maintaining inventory records. Identify the documentation used in each function to prevent inventory records from being manipulated.

Accepted Answer

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Question 18

Describe the audit process for inventory transactions, indicating the audit risks that need to addressed and the mitigating controls that can be implemented.

Accepted Answer

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Question 19

There are numerous factors that contribute to the risk of misstatement in the assertions for inventoriand cost of sales. List four of these factors.

Accepted Answer

The answer of There are numerous factors that contribute to...

Question 20

Identify the appropriate account balance audit objectivapplicable to inventorifor the assertion categoriof: existence completeness rights and obligations valuation and allocation presentation and disclosure.

Accepted Answer

The answer of Identify the appropriate account balance audit objectivapplicable...

Quiz 11: Auditing Inventoriand PPE

When reviewing accumulated depreciation, the auditor seeks evidence as to the reasonableness, consistency and accuracy of depreciation charges. The substantive procedurperformed seek to provide evidence for which assertion?

List the procedurthat should be adopted in a physical inventory count.

When performing tests of details of balancfor property, plant, and equipment, it is necessary for the auditor to review accumulated depreciation. Discuss what this review entails.

In a typical audit, verification of the ownership of plant and equipment is least likely to involve examination of:

Evidence concerning the pledging of property, plant, and equipment assets is likely to be obtained through:

Matters that should be considered by the auditor before reaching a conclusion about the reliability of an inventory count include all of the following except:

The application of analytical procedurto the audit of inventoriis often:

ABC Ltd is a retailer who is planning to undertake a full inventory count at year-end. Control risk over inventory records for this entity is deemed to be: