SOLVED

26) The audit of year-end physical inventories should include steps to verify that the client’s purchases and sales cutoffs were adequate. The audit steps should be designed to detect whether merchandise included in the physical count at year-end was not recorded as a: A) sale in the current period. B) sale in the subsequent period. C) purchase in the current period. D) purchase return in the subsequent period. 27) Which one of the following procedures would not be appropriate for an auditor in discharging his responsibilities concerning the client’s physical inventories? A) confirmation of goods in the hands of public warehouses B) supervising the taking of the annual physical inventory C) carrying out physical inventory procedures at an interim date D) obtaining written representation from the client as to the existence, quality, and dollar amount of the inventory 28) The auditor generally decides whether the inventory count can be taken before year-end primarily on the basis of: A) audit efficiency. B) accuracy of the perpetual inventory master files. C) client convenience. D) audit staff availability. 29) Which of the following control procedures would most likely be used to maintain accurate perpetual inventory records? A) independent storeroom count of goods received B) periodic independent comparison of records with goods on hand C) periodic independent reconciliation of control and subsidiary records D) independent matching of purchase orders, receiving reports, and vendors’ invoices 30) In valuing inventory, the auditor must consider all but which of the following factors? A) The valuation method must be in accordance with GAAP. B) The valuation method must be applied on a consistent basis. C) The inventory must be valued at the lower of cost or market. D) All inventory must be valued using the same valuation method under GAAP. 31) When an outside specialist has assumed full responsibility for taking the client’s physical inventory, reliance on the specialist’s report is acceptable if: A) the auditor’s report contains a reference to the assumption of full responsibility. B) the auditor is satisfied through application of appropriate procedures as to the reputation and competence of the specialist. C) the auditor conducted the same audit tests and procedures as would have been applicable if the client’s employees took the physical inventory. D) circumstances made it impracticable or impossible for the auditor either to do the work personally or observe the work done by the inventory firm. 32) To best ascertain that a company has properly included merchandise that it owns in its ending inventory, the auditor should review and test the: A) terms of the open purchase orders. B) purchase cutoff procedures. C) contractual commitments made by the purchasing department. D) purchase invoices received on or around year-end. 33) When auditing a public warehouse, which of the following is the most important audit procedure with respect to disclosing unrecorded liabilities? A) observation of inventory B) review of outstanding receipts C) inspection of receiving and issuing procedures D) confirmation of negotiable receipts with holders 34) When may auditors observe the physical inventory count? A) At an interim date At year-end Yes Yes B) At an interim date At year-end No No C) At an interim date At year-end Yes No D) At an interim date At year-end No Yes