Multiple Choice Questions
The following questions concern testing the client's internal controls for inventory and warehousing. Choose the best response.
a. When an auditor tests a client's cost accounting records, the auditor's tests are primarily designed to determine that
(1) Costs have been correctly assigned to finished goods, work-in-process, and cost of goods sold.
(2) Quantities on hand have been computed based on acceptable cost accounting techniques that reasonably approximate actual quantities on hand.
(3) Physical inventories are in substantial agreement with book inventories.
(4) The internal controls are in accordance with accounting standards and are functioning as planned.
b. The accuracy of perpetual inventory master files may be established, in part, by comparing perpetual inventory records with
(1) Purchase requisitions.
(2) Receiving reports.
(3) Purchase orders.
(4) Vendor payments.
c. Which of the following sets of duties related to inventory and warehousing causes the greatest concern about inadequate segregation of duties?
(1) Individuals in charge of approving disbursements related to inventory purchases have "read-only" ability to view the list of vendors in the pre-approved vendor master file.
(2) Purchasing agents who arrange for shipment of raw materials from vendors are responsible for verifying actual receipt of the inventory items at the receiving dock.
(3) The receiving department has access to copies of the purchase orders that exclude information about quantities ordered.
(4) Accounts payable personnel have access to receiving reports and purchases orders in addition to vendor invoices for inventory purchases.