SOLVED

11) A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of: A) direct labor’s hourly rate. B) raw materials per unit cost. C) cost allocations. D) number of direct labor hours applied. 12) Auditor tests of physical controls over raw materials, work-in-process, and finished 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 than the 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 the consequent 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 completely manufactured. 15) Hardy Company mass-produces eight different products. The controller who is interested in strengthening internal controls over the accounting for materials used in production would be most likely to implement a(n): A) perpetual inventory system. B) job order cost accounting system. C) economic order quantity system. D) separation of duties among production personnel. 16) Which of the following is an internal control weakness for a company whose inventory 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) Discuss the four aspects of the audit of cost accounting with which the auditor is most concerned. 18) If the perpetual inventory master files show lower quantities of inventory than the physical count, one explanation of the difference might be unrecorded sales. A) True B) False 19) When verifying the transfer of inventory from one location to another, the audit objectives with which the auditor is primarily concerned are occurrence of recorded transfers, completeness of recorded transfers, and accuracy of recorded transfers. A) True B) False 20) Production personnel should ordinarily be responsible for maintaining perpetual inventory records. A) True B) False 21) The extent and timing of an auditor’s physical examination of inventory is significantly influenced by the adequacy of the client’s perpetual inventory records. A) True B) False