8)A well-designed computerized system of perpetual inventory master filesincludes information about the:A)units of inventory purchased, sold, and on hand.B)unit costs of inventory purchased, sold, and on hand.C)units of raw materials, work-in-process, and finished goods.D)units and unit costs of inventory purchased, sold, and on hand.
9)Which of the following is a significant audit concern related to the transferof inventory from one location to another?A)Recorded transfers occurred.B)Transfers were properly transported.C)Transfers were properly planned.D)Transfers represent efficient movement of assets.
10)When auditing manufacturing overhead costs assigned to inventory, auditorsshould keep in mind that:A)GAAP has strict procedures that must be followed when assigning overhead towork-in-process inventory.B)overhead costs must be allocated to raw materials, work-in-process, andfinished goods inventory.C)management typically allocates overhead using total direct labor dollars as thebasis for the allocation.D)determining the reasonableness of the allocation method is relatively simplefor work-in-process inventory.
11)A major difficulty in the verification of inventory cost records for thepurpose of inventory valuation is in determining the reasonableness of the:A)direct labor hourly rate.B)raw material per unit cost.C)manufacturing overhead costs.D)number of direct labor hours applied.
12)Auditor tests of physical controls over raw materials, work-in-process, andfinished goods are performed by:A)
Examination
Observation
Inquiry
Yes
No
Yes
B)
Examination
Observation
Inquiry
No
Yes
No
C)
Examination
Observation
Inquiry
Yes
Yes
No
D)
Examination
Observation
Inquiry
No
Yes
Yes
13)If the perpetual inventory master files show lower quantities of inventory thanthe physical count, an explanation of the difference might be unrecorded:A)sales.B)sales discounts.C)purchases.D)purchase discounts.
14)Cost accounting controls are those related to the physical inventory and theconsequent costs from the point at which:A)materials are ordered for purchase until the finished product is sold.B)the customer’s order is received until the finished product is shipped.C)raw materials are requisitioned until the finished product is sent to storage.D)raw materials are requisitioned until the finished product is completelymanufactured.
15)In order to strengthen controls over cost accounting information, a companyshould consider implementing:A)perpetual inventory master files.B)a job order cost accounting system.C)an accounting system that keeps separate the records of the accountingdepartment from the records of the production department.D)an economic quantity order system.
16)Which of the following is an internal control weakness for a company whoseinventory of supplies consists of a large number of individual items?A)The cycle basis is used for physical counts.B)Supplies of relatively little value are expensed when purchased.C)Perpetual inventory records are maintained only for items of significant value.D)The storekeeper is responsible for maintenance of perpetual inventory records.
17)One of the auditor’s primary concerns in verifying the transfer of inventoryfrom one location to another is that:A)recorded transfers exist.B)all actual transfers are recorded.C)the quantity, date, and description of all recorded transfers are accurate.D)all of the above.