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Items 1 through 4 are selected questions typically found in questionnaires used by auditors to...

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Finance

Items 1 through 4 are selected questions typically found in questionnaires used by auditors to obtain an understanding of internal control in the inventory and warehousing cycle. In using the questionnaire for a client, a yes response to a question indicates a possible internal control, whereas a no indicates a potential deficiency.

1. Is a detailed perpetual inventory master file maintained for raw materials?

2. Are physical inventory counts made by someone other than storekeepers and those responsible for maintaining the perpetual inventory master file?

3. Is all inventory stored under the control of an inventory custodian in areas where access is limited?

For each scenario above, please answer each of the questions (in other words, you are responding to all three questions below for each scenario above, so you should have 9 responses).

a. For each of the preceding questions, state the purpose of the internal control.

b. For each of the preceding questions, identify the nature of the potential financial misstatement(s) if the control is not in effect/effective.

c. For each of the potential misstatements in part b above, list a substantive audit procedure to determine whether a material misstatement exists.

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