Flashcards in Assertion Evidence for Inventory Deck (14)
Assertions about Classes of Transactions - Occurrence
Vouch a sample of inventory additions (i.e., purchases) to receiving reports and purchase requisitions.
Assertions about Classes of Transactions - Completeness
Trace a sample of receiving reports to the inventory records (i.e., master file, status report).
Assertions about Classes of Transactions - Authorization
Test a sample of inventory shipments to ensure there are approved shipping tickets and customer sales
Assertions about Classes of Transactions - Accuracy
Recompute the mathematical accuracy of a sample of of inventory transactions (i.e., price x quantity). Audit standard costs or other methods used to price inventory. Trace costs used to price goods in the inventory compilation to standard costs or vendor's invoices.
Assertions about Classes of Transactions - Cutoff
Trace a sample of time cards before and after period end to the appropriate weekly inventory report, and trace the weekly inventory report to the general ledger to verify inventory transactions are recorded in the right period.
Assertions about Classes of Transactions - Classification
Examine a sample of inventory checks for proper classification into expense accounts.
Assertions about Account Balances at Period End - Existence
Observe count of physical inventory
Assertions about Account Balances at Period End - Rights and Obligations
Verify that inventory held on consignment for others is not included in inventory. Verify that bill-and-hold goods are not included in inventory.
Assertions about Account Balances at Period End - Completeness
Trace test counts and tag control information to the inventory compilation
Assertions about Account Balances at Period End - Valuation and allocation
Obtain a copy of the inventory compilation and agree totals to general ledger. Trace test counts and tag control information to the inventory compilation. Test mathematical accuracy of extensions and foot the inventory compilation. Inquire of management concerning obsolete, slow-moving, or excess inventory. Review book-to-physical adjustment for possible misstatements.
Assertions about Presentation and Disclosure - Occurrence, and rights and obligations
Inquire of management and review any loan agreements and board of directors' minutes for any indication that inventory has been pledged or assigned. Inquire of management about issues related to warranty obligations.
Assertions about Presentation and Disclosure - Completeness
Complete financial reporting checklist to ensure that all financial statement disclosures related to inventory are made.
Assertions about Presentation and Disclosure - Classification and understandability
Review inventory compilation for proper classification among raw materials, work in process, and finished goods. Read footnotes to ensure that required disclosures are understandable.