Review lli View :-,E-????| ? |?|| ? ???B\' ITNormal JNo Spaci AaBbCcD AaBbCcDc A

Question

Review lli View :-,E-????| ? |?|| ? ???B' ITNormal JNo Spaci AaBbCcD AaBbCcDc AaBbCi AaBbCc Heading 1 Heading 2 Styles Paragraph 1. Which of the following procedures i s usually performed by the auditor to determine if obsolete inventory exdsts? a Sample the inventory reported by the cient, examine the purchase date and receiving reports c lb/confirmation ofínventorywith client's customers C d. Footing the inventorysubsidiary ledger Wh ich of the following is not a standard procedure that the auditor normaly should follow inthe observation of inventory at year-end? aObserve the client taking inventorycount e selected test counts and trace into client's inventory compilation c.Review disclosure of inventory valuation Cd. Look for slow-moving, obsolete or damaged inventory The cash account is significant to the auditor for which of the following reasons? Investors want the company to hoid as much cash as possible C b Cash is susceptible to fraud such as theft ?.?The ènding balrce of cesn account is usually very high a.Cash hm.owliquidity

Explanation / Answer

1)

To identify the obsolete inventory auditor needs to do analysis of inventory turnover and sales reports.

Decrease in inventory turnover compared to prior periods and industry shows increase in inventory which inturn may indicate potential obsolete inventory. Sales report helps in doing the aging analysis of the inventory and which can help in finding the non-moving inventory. Sales report can also indicate the market price at which products are being sold which might be lower than the actual cost due to obsolescence.

Hence option (c) is correct.

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