Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 21, Problem 24DQP
a.(1)
To determine
Explain the validity of quantity of inventory tested during the
a.(2)
To determine
Describe the consequences of counting errors during the inventory test
b.
To determine
Explain the steps that are to be taken for inclusion of obsolete inventory.
c.
To determine
Explain the significance of the action to be taken for incorrect physical inventory.
d.
To determine
The steps to be followed for the arrival of shipments during physical inventory count.
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4. Assume that 50% of a client's inventory is located in 2 warehouses subject to wall-to-wall counts at period-end and the remaining 50% of the inventory is located across 110 retail locations around the US subject to periodic cycle counts. The retail locations hold similar inventory for sale to customers; use the same inventory management system; and utilize the same cycle count program which is monitored centrally. There are no locations which have an increased risk of material misstatement based on risk assessment procedures.
What is an appropriate testing approach based on the facts below?
A. Observe inventory at the 2 warehouses only
B. Observe inventory at the 2 warehouses as well as 10 of the retail locations
C. Observe inventory at 5 retail stores only
D. Observe inventory at 2 of the warehouses and combine the sales facilities into 1 Count Location, spreading test counts across all locations
You are asked to travel to Milwaukee to observe and verify the inventory of the Milwaukee branch of one of your cilents. You arrive on Thursday, December 30, and find that the inventory procedures have just been started. You spot a railway car on the sidetrack ar the unloading door and ask the warehouse superintendent, Buck Rogers, how he plans to inventory the contents of the car. He responds "We are not going to include the contents in the inventory."
Later in the day, you ask the bookkeeper for the invoive on the carload and the related freight bill. The invoice lists the various items, prices, and extensions of the goods in the car. You note that the carload of goods in the car was $35,300. The frieght bill called for a payment of $1,500. Terms were net 30 days. The bookkeeper affirms the fact that this invoice is to be held for recording in January.
a. Does your cilent have a liability that should be recorded at December 31? Discuss.
b. Prepare a journal entry(ies), if required,…
Assume that in an annual audit of Wildhorse Inc. at December 31, 2025, you find the following transactions near the closing date.
Assuming that each of the amounts is material, state whether the merchandise should be included in the client's inventory.
1.
2.
3.
4.
5.
Transactions
A special machine, fabricated to order for a customer, was finished and specifically segregated in the
back part of the shipping room on December 31, 2025. The customer was billed on that date and the
machine excluded from inventory although it was shipped on January 4, 2026.
Merchandise costing $5,880 was received on January 3, 2026, and the related purchase invoice
recorded January 5. The invoice showed the shipment was made on December 29, 2025, f.o.b.
destination.
A packing case containing a product costing $7,140 was standing in the shipping room when the
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Chapter 21 Solutions
Auditing And Assurance Services
Ch. 21 - Prob. 1RQCh. 21 - Prob. 2RQCh. 21 - Prob. 3RQCh. 21 - Prob. 4RQCh. 21 - Prob. 5RQCh. 21 - Prob. 6RQCh. 21 - Prob. 7RQCh. 21 - Prob. 8RQCh. 21 - Prob. 9RQCh. 21 - Prob. 10RQ
Ch. 21 - Prob. 11RQCh. 21 - Each employee of the Gedding Manufacturing Co., a...Ch. 21 - Prob. 13.1MCQCh. 21 - Prob. 13.2MCQCh. 21 - Prob. 13.3MCQCh. 21 - Prob. 14.1MCQCh. 21 - Prob. 14.2MCQCh. 21 - Prob. 14.3MCQCh. 21 - Prob. 15.1MCQCh. 21 - Prob. 15.2MCQCh. 21 - Prob. 15.3MCQCh. 21 - Prob. 16DQPCh. 21 - Prob. 17DQPCh. 21 - Prob. 18DQPCh. 21 - Prob. 19DQPCh. 21 - Prob. 20DQPCh. 21 - Prob. 21DQPCh. 21 - Prob. 22DQPCh. 21 - Prob. 23DQPCh. 21 - Prob. 24DQPCh. 21 - Prob. 25DQPCh. 21 - Prob. 26DQPCh. 21 - Prob. 27DQPCh. 21 - Prob. 28DQPCh. 21 - Prob. 29DQPCh. 21 - Prob. 30C
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