Learning Objective 21-1 1) Receipt of ordered materials by the receiving department will generate the completion of a form called the: A) bill of lading. B) receiving report. C) materials requisition. D) inventory acquisition summary. 2) ________ is normally characterized as a difficult and complex account to audit. A) Property plant and equipment B) Cash C) Inventory D) Prepaid insurance 3) Inventory is a complex area to audit for all but which of the following reasons? A) Inventory is often in different locations. B) There are several acceptable valuation methods and some entities use different methods for different types of inventory. C) Inventory is often the largest account on the balance sheet. D) Inventory valuation includes few estimates. 4) In most manufacturing companies the inventory and warehousing cycle begins with the: A) receipt of a customer’s order. B) completion of production of a customer’s order. C) initiation of production of a customer’s order. D) acquisition of raw materials for production of an order. 5) ________ accumulate costs by individual jobs as material is issued into production and labor costs are incurred. A) Just-in-time production systems B) Job order cost systems C) Process cost systems D) Manufacturing systems 6) Master files spreadsheets and reports that accumulate material labor and overhead as the costs are incurred are: A) accounting systems. B) storeroom documents. C) cost accounting records. D) finished goods inventory records. 7) The main difference between job order and process costing systems is that: A) one accumulates costs by materials issued and the other by labor incurred. B) one accumulates costs by individual jobs and the other by particular processes. C) one emphasizes costs accumulated in completed products and the other emphasizes costs associated with work-in-process. D) one emphasizes costs adding value to the product and the other emphasizes costs incurred because of waste scrap and obsolescence. 8) The inventory and warehousing cycle can be thought of as having two separate but closely related systems one involving the actual physical flow of goods and the other the: A) related costs. B) storage of the goods. C) internal control over those goods. D) prevention of waste obsolescence and theft. 9) Auditors test the quantity of materials charged to work-in-process by tracing these quantities to: A) cost ledgers. B) perpetual inventory records. C) receiving reports. D) material requisitions. 10) What are two factors affecting the complexity of the audit of inventory?
