Acct 460 Chapter 12 exercise

Acct 460 Chapter 12 exercise

ACCT 460 Chapter 12 Inventory Exercise

In the space provided below provide your response to the Exercise. Submit your answer through the course dropbox.

Part I.

Auditors often observe the counting of their client's inventories. You are working in the area of inventory with a new assistant on the audit of Keystone Computers, Inc. The assistant has a number of questions concerning inventory and the observation of inventory. Please reply "yes" or "no" to answer the following questions.

A With strong internal control, may Keystone Computers Inc.'s inventory count be performed during the year rather than at year end?
B Must I document all my test counts in the working papers?
C Am I correct that our observation of the counting of the inventory addresses only the existence of inventory, and not the completeness of the count?
D Is it correct that, since Keystone Computers Inc. manufactures a product, direct labor and overhead ordinarily become part of inventory costs?
E Should Keystone Computers inventory be valued at the lower of standard cost or market?
F Is it safe to assume that any inventory items present as "consigned in" should not be included in the client's inventory?
G When I take test counts of items, does this eliminate the need for Keystone Computers Inc. personnel to count those items?
H Do I need to count all items in the inventory?


Part II.

Assume that Keystone Computers purchases all goods directly from wholesalers or manufacturers. First identify the appropriate audit objective from the list below that matches the audit objective description. Please enter the letter in the appropriate place on the grid. Next, select the most appropriate audit procedure from the list below and enter the number in the appropriate place on the grid.

Audit Objective:

A Completeness
B Existence C Accuracy D Valuation
E Rights and Obligations
F Cutoff

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