9/19/2017 Assignment Print View
http://ezto.mheducation.com/hm.tpx?todo=C15PrintView&wid=13252706490057246&role=student&sid=13252706684798271 1/5
1. Award: 2 out of 2.00 points
Score: 10/10 Points 100 %
Chapter 01 Multiple Choice – Question 48 LO 1-3
Which of the following audit procedures probably would provide the most reliable evidence related to
the entity’s assertion of rights and obligations for the inventory account?
Trace test counts noted during physical count to the summarization of quantities.
Inspect agreements for evidence of inventory held on consignment.
Select the last few shipping advices used before the physical count and determine whether
the shipments were recorded as sales.
Inspect the open purchase order file for significant commitments to consider for disclosure.
This is clearly a test related to rights and obligations as the question that must be answered with
evidence is to establish that the inventory reported as assets really is owned by the company.Goods
on consignment, by definition, are not owned by the company.Thus, there is a risk that the company is
recording assets that they do not own on their balance sheet.
References
Multiple Choice Difficulty: 2 Medium
Chapter 01
Multiple Choice –
Question 48 LO
1-3
Learning Objective:
01-03 Describe and
define the assertions
that management
makes about the
recognition,
measurement,
presentation, and
disclosure of the
financial statements
and explain why
auditors use them as
the focal point of the
audit.
✓
9/19/2017 Assignment Print View
2. Award: 2 out of 2.00 points
Chapter 01 Multiple Choice – Question 54 LO 1-3
An auditor selected items for test counts from the client’s warehouse during the physical inventory
observation. The auditor then traced these test counts into the detailed inventory listing that agreed to
the financial statements. This procedure most likely provided evidence concerning management’s
assertion of:
Rights and obligations.
Completeness.
Existence.
Valuation.
Most importantly, the auditor did not select items for testing from any financial statement records.
Rather, the auditor selected items to be tested from the warehouse, without considering the financial
statement records. As a result, this is a test that is designed specifically to test whether all items that
should be recorded on the financial statements actually are included on the financial statements. Thus,
the assertion being tested is the completeness assertion. The absolute key to understanding this
✓
