The Tests of Controls for Inventory Records Would Include the Following

question 35

Short Answer

The tests of controls for inventory records would include the following procedures.
A.Existence.
B.Rights and obligations.
C.Completeness.
D.Accuracy and valuations.
E.Presentation and disclosure.For each of the procedures,choose the letter of the correct ASB balance assertion(s).Only one letter per procedure should be used. ----- $\quad$ 1. Test counted inventory and traced the count to the perpetual inventory record.
----- $\quad$ 2. Selected a sample of inventory items from the perpetual records and vouch additions to receiving reports.
----- $\quad$ 3. Reviewed a sample of vendor invoices for prices paid for inventory.
----- $\quad$ 4. Review inventory footnote for the financial statements.
----- $\quad$ 5. Reviewed vendor invoices and purchase orders for terms of the contract.

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Definitions:

Accounting Principles

The standardized rules and guidelines under which financial statements are prepared, widely known as Generally Accepted Accounting Principles (GAAP).

Financial Covenants

Conditions set by lenders in loan agreements that the borrower must adhere to, designed to maintain the borrower's financial stability and safeguard the loan repayment.

Accounting Changes

Adjustments made to the accounting methods, estimates, or reporting entities of a firm, which must be disclosed to stakeholders to ensure transparency.

Discretionary Accruals

Accounting adjustments made by management's judgment, often to smooth out earnings or manipulate financial statements.