Some inventory errors are said to be “self-correcting,” in that the error has the opposite financial statement effectin the period following the error, thereby “correcting,” the original account balance errors.Required:Despite this self-correcting feature, discuss why these errors should not be ignored and describe the steps requiredto account for the error correction.

Q: Which of the following is not an advantage of a perpetual inventory system? a. Assists in the…

A: The perpetual inventory method is a much better method in comparison to the periodic inventory…

Q: Where there is a reversal of a previous inventory write-down, the entry would involve a _______to…

A: Inventory is the combination of all the goods which are ready for sale, goods which are in process,…

Q: der the periodic inventory system, all increases and decreases in inventory, such as purchases,…

A: Solution: False.  Under periodic inventory system Daily inventory records are not maintained.

Q: In the auditor's perspective, what is the ideal timing of the inventory count procedures? * A.…

A: Inventory Count Procedure - Inventory count procedure includes checking of financial records with…

Q: From the auditors’ point of view, inventory counts are more acceptable prior to the year-endwhena.…

A: Inventory Count:   The procedure of physically counting or verifying the inventory numbers and…

Q: A typical substantive procedure for inventory balance and purchase transactions may include…

A: The question is related to the Substantive audit procedures. The Substantive audit procedures are…

Q: Which of the following statement about the inventory write-down is not correct? * If the cost is…

A: As per International Accounting Standards IAS 2- “ Inventory includes assets that are held for the…

Q: If inventory errors are said to correct themselves, why are accounting users concerned when such…

A:

Q: Which of the following is not an advantage of a perpetual inventory system? a. assits in the…

A: Under the perpetual inventory system, transaction related to the inventory is updated immediately as…

Q: Describe Change in Inventory Method and Inventory Errors.

A: Change in Inventory method:   Inventory change is the difference between the amount of last period's…

Q: Which of the following is a substantive test in relation to completeness? a. Inspect physical…

A: Inspect physical inventory, checking from inventory records to physical stock is an Audit assertion…

Q: Ann M. Martin Company makes the following errors during the current year. (Evaluate each case…

A: Introduction Errors in Inventory will affect Cost of Goods Sold, Gross Profit as well as Net Income.…

Q: T, F. Under the GAAP rule, inventories can be reported at above cost in the balance sheet. T, F. If…

A: Under GAAP rules , inventory is valued at cost or net realizable value which ever is lower due to…

Q: Describe the procedures, documents, and departments involved when insufficient inventory is…

A: When there is insufficient inventory available to fulfill a customer's approved order, then the…

Q: Management is prone to overstate:     a. accounts receivable and inventory.     b. accounts…

A: The sum shown on the financial statement is higher than it should have been if accounts or a number…

Q: What are the key factors that can lead to an under/overstatement of the inventory balance?

A: Answer: Inventory balances are sometimes overstated and sometimes understated.

Q: The auditor computed inventory turnover and compared it to prior years.  This substantive test…

A: Auditing inventory refers to cross-checking the physical inventory with the inventory reported in…

Q: A list of errors is shown below: Show the effects of the errors on the indicated balance sheet and…

A:

Q: Do you agree with the following statements? Express your opinion on each statement.

A: 1: This statement is correct  This can be explained with the help of example: Suppose closing stock…

Q: Which of the following statements on inventory valuation errors is false? a. Over a two-year…

A: Ending inventory as regarding as credit item and will effect net income and balance sheet values.…

Q: Do you agree with the following statements? Express your opinion on each statement. An inventory…

A: 1) This statement is correct  This can be explain with the help of example: Suppose closing stock is…

Q: Which of the following may be an indication of inventory theft? COGS is significantly different…

A: Inventory can be defined as the stock of goods or products that is manufactured and stored by the…

Q: When auditing merchandise inventory at year-end, the auditor performs audit proceduresto obtain…

A: Given information is: When auditing merchandise inventory at year-end, the auditor performs audit…

Q: Describe the effects of misstatement of ending inventory.

A:

Q: Analysts must recognize that the use of the specific identification method to value inventory has a…

A: The amount, by which the Inventory Level exceeds the Closing Inventory level is referred to as the…

Q: what are the effects of inventory errors on the financial statements

A: Incorrect recording of Inventory balance results in the Inventory errors.

Q: Which of the following is not a reason for the physical inventory count to differ from what…

A: Inventory is one of the important current asset of the business. This can be in form of raw…

Q: Explain briefly the application of the LCM rule to ending inventory. Describe its effect on the…

A:

Q: If beginning inventory is understated, cost of goods sold would also be understated. True False

A: The cost of goods sold can be calculated by adding up net purchase and deducting ending inventory…

Q: Under a just-in-time inventory system, management strives to O None of the answers are correct.…

A: Answer is = Have inventory available when it is needed.

Q: Which of the following is false regarding a perpetualinventory system?a. Physical counts are never…

A: Option “a” is the correct answer that is physical counts are never needed because records are…

Q: Explain the appropriate accounting treatment required when an inventory error is discovered.

A: Assets: These are the resources owned and controlled by business and used to produce benefits for…

Q: Provide examples of some procedures that can avoid inventory shrinkage.

A: In the business organization when the situation of inventory lost, theft, or damage occur is known…

Q: the auditor decided to render analytical procedure in testing the reasonableness of the inventory…

A: The method of retail inventory refers to the accounting process which is used to estimate the…

Q: What would you do, and how would you document your decision?

A: Given case is: You have Noticed that the A/R clerk has created abnormally  high number of credit…

Q: If a misstatement of inventory occurs, the net income for-----periods will be misstated

A: The ending inventory affects the income statement and after that ending inventory becomes the…

Q: 3. Indicate the effect of the following errors on gross profit and cost of goods sold (COGS), i.e.,…

A: Cost of goods sold (COGS)- The cost incurred on the goods sold during the period is referred to as…

Q: Explain Potential Misstatements- Inventory/ Cost of Goods Sold and the description of misstatements…

A: Internal control is a procedure for insuring that an organization's objectives in operational…

Fraud

Fraud in accounting is the planned manipulation of financial documents to make a false appearance of corporate financial health. Moreover, it includes an employee, accountant, or the company itself misleading investors and shareholders.