Chapter 21 – Audit of the Inventory and Warehousing Cycle

Audit of the Inventoryand Warehousing CycleChapter 21©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 21 - 1Learning Objective 1Describe the business functionsand the related documents andrecords in the inventory andwarehousing cycle.©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 21 - 2Flow of Inventory and CostsRaw Materials Work-in-ProcessBeginning Raw Beginning Cost ofinventory materials inventory goodsused manufacturedPurchases EndinginventoryEndinginventoryCost ofgoods soldDirect Labor Finished GoodsActual Applied Beginning Cost ofinventory goods soldManufacturing OverheadEndingActual Applied inventory©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 21 - 3Learning Objective 2Describe how e-commerceaffects inventory management.©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 21 - 4How E-Commerce Affects Inventory ManagementThe Internet enables companies to providecomplete descriptions of their inventoryon a real-time basis.The use of the Internet and other e-commerceapplications may lead to financial reportingrisks if access to inventory databases andsystems is not adequately controlled.©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 21 - 5Learning Objective 3Explain the five parts of the auditof the inventory and warehousingcycle.©2008 Prentice Hall Business Publishing, Auditing 12/e, ...