Chapter21---final

21-1CHAPTER21Multiple-ChoiceQuestions1.easybReceiptoforderedmaterialsbythereceivingdepartmentwillgeneratethecompletionofaformcalledthe:a.billoflading.b.receivingreport.c.materialsrequisition.d.inventoryacquisitionsummary.2.easycTheauditof______isoftenthemostdifficultandcomplexpartofanaudit.a.property,plantandequipmentb.cashc.inventoryd.prepaidinsurance3.easydInventoryisacomplexareatoauditforallbutwhichofthefollowingreasons?a.Inventoryisoftenindifferentlocations.b.Thereareseveralacceptablevaluationmethodsandsomeentitiesusedifferentmethodsfordifferenttypesofinventory.c.Inventoryisoftenthelargestaccountinworkingcapital.d.Inventoryvaluationincludesfewestimates.4.easybWhenlaborisasignificantpartofinventory,verifyingtheproperaccountingofthesecostsshouldbetestedinthe:a.inventoryandwarehousingcycle.b.payrollandpersonnelcycle.c.acquisitionsandpaymentscycle.d.cashcycle.5.easyaForretailandwholesalebusinesses,themostimportantinventoryis:a.merchandiseavailableforsale.b.work-in-process.c.rawmaterials.d.alloftheabove.6.easybTheauditprocedure“observetheclienttakingaphysicalinventorycountandtestthecount”issufficienttodetermineallofthefollowingexcept:a.whetherrecordedinventoryactuallyexists.b.whetherrecordedinventorywasproperlyvaluedbytheclient.c.whetherrecordedinventorywasproperlycountedbytheclient.d.Noneoftheaboveanswersiscorrect.7.easydInmostmanufacturingcompanies,theinventoryandwarehousingcyclebeginswiththe:a.receiptofacustomer’sorder.b.completionofproductionofacustomer’sorder.c.initiationofproductionofacustomer’sorder.d.acquisitionofrawmaterialsforproductionofanorder.21-28.easycTheauditteststoverifythattheclientisusinganinventorymethodwhichisgenerallyacceptedandtoverifythatphysicalcountswerecorrectlysummarizedareperformedduringtheauditofthe:a.acquisitionandpaymentscycle.b.payrollandpersonnelcycle.c.inventoryandwarehousingcycle.d.salesandcollectioncycle.9.easydWhichofthefollowingwouldnotbeanappropriateinitiationofapurchaserequisition?a.Oneinitiatedbyacomputersystemwhenrawmaterialsreachapredeterminedlevel.b.Oneinitiatedbasedonaperiodiccountofrawmaterials.c.Oneinitiatedbystockroompersonnelasrawmaterialsareneeded.d.Eachoftheaboveisanappropriateinitiation.10.easyaAlmostallcompaniesneedphysicalcontrolsovertheirassetstopreventloss.Whichofthefollowingisnotanexampleofsuchacontrol?a.Perpetualinventorymasterfiles.b.Segregated,limited-accessstorageareas.c.Custodyofassetsassignedtospecificresponsibleindividuals.d.Approvedprenumbereddocumentsforauthorizingmovementofinventory.11.easydWhichdepartmentwithinamanufacturingcompanyisoftenresponsibleforthereviewofproductionandscrapreports?a.Purchasing.b.AccountsPayable.c.Accounting.d.Production.12.easybHandlingthereceiptoforderedgoodsisapartofthe________cycle.a.purchasingb.acquisitionandpaymentc.inventoryd.inventoryandwarehousing13.easyb_________accumulatecostsbyindividualjobsasmaterialisissuedintoproductionandlaborcostsareincurred.a.Just-in-timeproductionsystemsb.Jobordercostsystemsc.Processcostsystemsd.Manufacturingsystems14.easycTheremustbeaperiodicphysicalcountbytheclientoftheinventoryitemsonhand:a.onlyiftheclientusestheLIFOmethod.b.onlyiftheclientusesalower-of-cost-or-marketmethod.c.regardlessoftheclient’sinventoryvaluationmethod.d.onlyiftheclientuseseithertheLIFOorFIFOmethod.15.easydWithregardtothephysicalcountofinventory,necessarycontrolproceduresinclude:a.properinstructionsforthephysicalcount.b.independentinternalverificationofthecounts.c.independentreconciliationsofthephysicalcountswithperpetualinventorymasterfiles.d.allthreeoftheabove.21-316.easycIftheauditorconcludesthatphysicalcontrolsoverinventoryaresoinadequatethattheinventorywillbedifficulttocount,theauditorshouldordinarily:a.withdrawfromtheengagement.b.issueaqualifiedauditreport.c.conductexpandedobservationtestsofphysicalinventory.d.anyoftheabove.17.easyaFromwhichofthefollowingevidence-gatheringauditprocedureswouldanauditorobtainmostassuranceconcerningtheexistenceofinventories?a.Observationofphysicalinventorycounts.b.Writteninventoryrepresentationsfrommanagement.c.Confirmationofinventoriesinapublicwarehouse.d.Auditor’srecomputationofinventoryextensions.18.easyaJohnsonCo.’sphysicalcountofinventorieswaslowerthantheinventoryquantitiesshowninitsperpetualrecords.Thissituationcouldbetheresultofthefailuretorecord:a.sales.b.salesreturns.c.purchases.d.purchasediscounts.19.easydWhichofthefollowingisnotafunctionwithintheinventoryandwarehousingcycle?a.Processthegoods.b.Storerawmaterials.c.Shipfinishedgoods.d.Processinvoicesforshippedgoods.20.easybIfanauditorwereconcernedwithobtainingevidenceabouttheappropriatenessofthevalueofinventory,whichofthefollowingtestswouldbemostappropriate?a.Compilationtests.b.Pricetests.c.Confirmationofinventoryheldbyoutsideparties.d.Physicalexaminationoftheinventory.21.easybWhichofthefollowingisthebestauditprocedureforthediscoveryofdamagedmerchandiseinaclient’sendinginventory?a.Comparethephysicalquantitiesofslow-movingitemswithcorrespondingquantitiesoftheprioryear.b.Observemerchandiseandrawmaterialsduringthecli