SOLVED

Learning Objective 21-1 1) Receipt of ordered materials by the receiving department will generate the completion of a form called the: A) bill of lading. B) receiving report. C) materials requisition. D) inventory acquisition summary. 2) Which of the following would you normally characterize as a difficult and complex account to audit? A) property, plant and equipment B) cash C) inventory D) prepaid insurance 3) Inventory is a complex area to audit for all but which of the following reasons? A) Inventory is often in different locations. B) There are several acceptable valuation methods and some entities use different methods for different types of inventory. C) Inventory is often the largest account in working capital. D) Inventory valuation includes few estimates. 4) In most manufacturing companies, the inventory and warehousing cycle begins with the: A) receipt of a customer’s order. B) completion of production of a customer’s order. C) initiation of production of a customer’s order. D) acquisition of raw materials for production of an order. 5) ________ accumulate costs by individual jobs as material is issued into production and labor costs are incurred. A) Just-in-time production systems B) Job order cost systems C) Process cost systems D) Manufacturing systems 6) In performing audit tests of the client’s cost accounting system, the auditor is primarily concerned with which of the following? A) System is functioning properly in providing costing and pricing information for management. B) Costs have been properly assigned to finished goods, work-in-process, and cost of goods sold. C) Inventory counts agree with the client’s accounting records. D) The client’s cost accounting system is designed on the basis on acceptable cost accounting systems. 7) Master files, worksheets, and reports that accumulate material, labor, and overhead as the costs are incurred are: A) accounting systems. B) storeroom documents. C) cost accounting records. D) finished goods inventory records. 8) The main difference between job order and process costing systems is that: A) one accumulates costs by materials issued and the other by labor incurred. B) one accumulates costs by individual jobs and the other by particular processes. C) one emphasizes costs accumulated in completed products and the other emphasizes costs associated with work-in-process. D) one emphasizes costs adding value to the product and the other emphasizes costs incurred because of waste, scrap, and obsolescence. 9) The auditor’s main concerns in verifying transfers of inventory do not include whether: A) recorded transfers exist. B) transfers represent appropriate uses of company resources. C) all actual transfers are recorded. D) the details of the transfer are accurately recorded. 10) What are two factors affecting the complexity of the audit of inventory? 11) State the six functions that make up the inventory and warehousing cycle and, for each function, identify the related documents and/or records that would be used by a manufacturing company. 1