8) A well-designed computerized system of perpetual inventory master files includes information about the:
A) units of inventory purchased, sold, and on hand.
B) unit costs of inventory purchased, sold, and on hand.
C) units of raw materials, work-in-process, and finished goods.
D) units and unit costs of inventory purchased, sold, and on hand.
9) Which of the following is a significant audit concern related to the transfer of inventory from one location to another?
A) Recorded transfers occurred.
B) Transfers were properly transported.
C) Transfers were properly planned.
D) Transfers represent efficient movement of assets.
10) When auditing manufacturing overhead costs assigned to inventory, auditors should keep in mind that:
A) GAAP has strict procedures that must be followed when assigning overhead to work-in-process inventory.
B) overhead costs must be allocated to raw materials, work-in-process, and finished goods inventory.
C) management typically allocates overhead using total direct labor dollars as the basis for the allocation.
D) determining the reasonableness of the allocation method is relatively simple for work-in-process inventory.
11) A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of the:
A) direct labor hourly rate.
B) raw material per unit cost.
C) manufacturing overhead costs.
D) number of direct labor hours applied.
12) Auditor tests of physical controls over raw materials, work-in-process, and finished goods are performed by:
A)
Examination
Observation
Inquiry
Yes
No
Yes
B)
Examination
Observation
Inquiry
No
Yes
No
C)
Examination
Observation
Inquiry
Yes
Yes
No
D)
Examination
Observation
Inquiry
No
Yes
Yes
13) If the perpetual inventory master files show lower quantities of inventory than the physical count, an explanation of the difference might be unrecorded:
A) sales.
B) sales discounts.
C) purchases.
D) purchase discounts.
14) Cost accounting controls are those related to the physical inventory and the consequent costs from the point at which:
A) materials are ordered for purchase until the finished product is sold.
B) the customer’s order is received until the finished product is shipped.
C) raw materials are requisitioned until the finished product is sent to storage.
D) raw materials are requisitioned until the finished product is completely manufactured.
15) In order to strengthen controls over cost accounting information, a company should consider implementing:
A) perpetual inventory master files.
B) a job order cost accounting system.
C) an accounting system that keeps separate the records of the accounting department from the records of the production department.
D) an economic quantity order system.
16) Which of the following is an internal control weakness for a company whose inventory of supplies consists of a large number of individual items?
A) The cycle basis is used for physical counts.
B) Supplies of relatively little value are expensed when purchased.
C) Perpetual inventory records are maintained only for items of significant value.
D) The storekeeper is responsible for maintenance of perpetual inventory records.
17) One of the auditor’s primary concerns in verifying the transfer of inventory from one location to another is that:
A) recorded transfers exist.
B) all actual transfers are recorded.
C) the quantity, date, and description of all recorded transfers are accurate.
D) all of the above.