For Each of the Following, State Whether It Is a Test

question 34

Essay

For each of the following, state whether it is a test of details of account balances or a test of details of disclosures. Then note for which assertion the test provides evidence.
1. Inspect loan agreements under which an entity's inventories are pledged.
2. Review inventory compilation for proper classification among raw materials, work in process, and finished goods.
3. Observe the count of physical inventory.
4. Trace test counts and tag control information to the inventory compilation.
5. Inquire of management about issues related to LIFO liquidations.
6. Review book-to-physical adjustments for possible misstatements.

Understand the fundamental concepts and assumptions underlying accounting (monetary unit assumption, going concern assumption, separate entity assumption).

Interpret changes in financial position and performance over time through financial statements.

Recognize the importance of ethics and regulations in accounting (Sarbanes-Oxley Act, ethical standards).

Account for the initial and subsequent measurement of assets, liabilities, and equity.