Financial Statement Assertions: Inventory
For each, indicate the assertion:
1. Inventories are properly at the lower of cost or market.
2. Inventories in the warehouse on the balance sheet date are all reported.
3. Inventory includes all items on hand.
4. Liens are disclosed in footnotes.
5. The client has legal title to inventory.
6. The financial statements reveal raw materials, work in progress, and finished goods.
7. Inventories include items in transit at the balance sheet date and on consignment.
8. Inventories on consignment from suppliers are excluded.
9. Quantities times price have been corrected computed, totaled, and the total agrees with the general ledger.
10. Slow-moving items are identified and properly priced.
11. Inventories are properly classified in the balance sheet.
Assertions about account balances:
• Existence--assets, liabilities, and equity interests exist.
• Completeness--all assets, liabilities and equity interests have been recorded.
• Rights and obligations--the entity holds or controls the rights to assets and liabilities are the obligations of the entity.
• Valuation and allocation--assets, liabilities, equity interests are included at appropriate amounts.
Assertions about transactions and events:
• Occurrence—transactions and events that have been recorded have occurred and pertain to the entity.
• Completeness—all transactions and events have been recorded.
• Accuracy—amounts and other data relating to recorded transactions have been recorded appropriately.
• Cutoff—transactions and events have been recorded in the correct accounting ...
Your tutorial is 437 words and includes a list of all the assertions by the three categories so all the potential assertions can be studied. The primary assertion is noted along with a secondary one for two of these.
Identify the assertions for audit of client's inventory
5-29 (Assertions) In planning the audit of a client's inventory, an auditor identified the following issues that need audit attention.
1. Inventories are properly stated at the lower of cost or market.
2. Inventories included in the balance sheet are present in the warehouse on the balance sheet date.
3. Inventory quantities include all products, materials, and supplies on hand.
4. Liens on the inventories are properly disclosed in notes to the financial statements.
5. The client has legal title to the inventories.
6. The financial statements disclose the amounts of raw materials, work in progress, and finished goods.
7. Inventories include all items purchased by the company that are in transit at the balance sheet date and that have been shipped to customers on consignment.
8. Inventories received on consignment from suppliers have been excluded from inventory.
9. Quantities times prices have been properly extended on the inventory listing, the listing is properly totaled, and the total agrees with the general ledger balance for inventories.
10. Slow-moving items included in inventory have been properly identified and priced.
11. Inventories are properly classified in the balance sheet as current assets.
Identify the assertion for items 1 through 11 above.View Full Posting Details