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Auditing & Assurance 101 Practice Test: Audit of the Inventory and Warehousing Cycle
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Avg score: 33% • Most missed: “In job cost systems, costs are accumulated by individual jobs.”
The audit of the inventory and warehousing cycle can be broken down into five activities: - Acquiring and recording raw materials, labor, and overhead - Internally transferring assets and costs - Shipping goods and recording revenue and costs - Physically observing inventory - Pricing and compiling inventory  The audit of the inventory and warehousing cycle can be divided into five activities within the cycle: Acquire and record raw materials, labor, and overhead. Internally transfer assets and costs. Ship goods and record revenue and costs. Physically observe inventory. Price and... Show more
Auditing & Assurance 101 Practice Test: Audit of the Inventory and Warehousing Cycle
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25 Questions

1. To assure proper segregation of duties, who should maintain the perpetual inventory master files?
2. When there are no perpetual inventory files and inventory is material:
3. The audit procedure 'observe the client taking a physical inventory count and test the count' is sufficient to determine all of the following except:
4. Which department within a manufacturing company is often responsible for the review of production and scrap reports?
5. Inventory is a complex area to audit for all but which of the following reasons?
6. While separate perpetual inventory records are normally kept for raw materials and finished goods, most companies do not use perpetual for work-in-process.
7. The auditing procedures generally used for the physical observation of inventory and the pricing and compilation of inventory are:
8. Which of the following is an internal control weakness for a company whose inventory of supplies consists of a large number of individual items?
9. Master files, worksheets, and reports that accumulate material, labor, and overhead as the costs are incurred are:
10. Assume that the client's valuation of an inventory item is $10 per unit for 1,000 units, using first-in, first-out (FIFO). If the most recent acquisition of inventory was for 600 units at $10 per unit and the immediately preceding acquisition was for 700 units at $9 per unit, the inventory item is in error and it is:
11. McKesson & Robbins Company is a well-known audit case involving auditor responsibility. What occurred at the McKesson & Robbins Company to change the way in which auditors audit inventory?
12. In performing audit tests of the client's cost accounting system, the auditor is primarily concerned with which of the following?
13. When auditing a public warehouse, which of the following is the most important audit procedure with respect to disclosing unrecorded liabilities?
14. After accounting for a sequence of inventory tags, an auditor traces a sample of tags to the physical inventory listing to obtain evidence that all items:
15. The test of details of balance procedure which requires the auditor to perform tests of lower-of-cost-or-market, selling price, and obsolescence is an attempt to satisfy the objective of:
16. A common inventory observation procedure is to select a random sample of tag numbers and identify the tag with that number attached to the actual inventory item. The audit objective being achieved by this procedure is:
17. Which of the following controls would be appropriate regarding the release of materials from a stockroom?
18. Auditors test the quantity of materials charged to work-in-process by tracing these quantities to:
19. The receipt of raw materials is a part of the acquisition and payment cycle.
20. The inventory and warehousing cycle can be thought of as having two separate but closely related systems, one involving the actual physical flow of goods, and the other the:
21. You are gathering evidence for the audit objective that existing inventory items are included in the inventory listing schedule. The audit procedure that would provide you with the best evidence to confirm this objective is:
22. Pricing manufactured inventory is difficult. Auditors must evaluate the method of allocating manufacturing overhead for all but which of the following?
23. There must be a periodic physical count by the client of the inventory items on hand:
24. Which of the following would you normally characterize as a difficult and complex account to audit?
25. When performing audit tests of pricing and compilation for inventory, the client's perpetual inventory master file may be used in place of vendors' invoices if controls over the perpetual inventory master file are adequate.

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