A)State Seven Specific Balance-Related Audit Objectives for Inventory Pricing and Compilation

Question

Examlex · Accepted Answer

The Answer is A)Balance-related audit objectives for inventory pricing and compilation include:
1.Inventory on the inventory listing schedule agrees with the physical inventory counts,the extensions are correct,and the total is correctly added and agrees with the general ledger (allocation).Foot the inventory listing schedules.
2.Inventory items on the inventory listing schedule exist (existence).Trace inventory listed in the schedule to inventory tags and auditor's recorded counts for existence and description.
3.Existing inventory items are included on the inventory listing schedule (completeness).Account for unused tag numbers shown in the auditor's working papers to make sure no tags have been added.
4.Inventory items on the inventory listing schedule are accurate (accuracy).Trace inventory listed in the schedule to inventory tags and auditor's recorded counts for quantity and description.
5.Inventory items on the inventory listing schedule are properly classified (classification).Compare the classification into raw materials,work-in-process,and finished goods by comparing the descriptions on inventory tags and auditor's recorded test counts with the inventory listing schedule.
6.Inventory items on the inventory listing are stated at realizable value (valuation).Perform tests of lower-of-cost-or-market,selling price,and obsolescence.
7.The client has rights to inventory items on the inventory listing schedule (rights).Trace inventory tags identified as non-owned during the physical observation to the inventory listing schedule to make sure these have not been included.
B)The need to verify the cost of raw materials,direct labour,and manufacturing overhead in pricing work-in-process and finished goods has the effect of making the audit of work-in-process and finished goods inventory more complex than the audit of purchased inventory.

A)State Seven Specific Balance-Related Audit Objectives for Inventory Pricing and Compilation

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