Management and Organizational Studies 3363A/B Chapter Notes - Chapter 14: Revenue Recognition, Flight Controller, Inventory Turnover

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3363A/B
• Professor: Michelle Loveland

Document Summary

Chapter 14 audit of the inventory and distribution cycle. Assignment: key audit areas (you should have 8, e. g. Revenue recognition: substantive testing procedures not test of controls. Inventory and distribution cycle consists of two things: actual physical flow of goods, related costs. An overview of the audit process for inventory: objective determine that raw materials, work in process, finished goods inventory, and cost of goods sold is fairly stated. ** risk will vary based on the business: examples, Identifying and assess fraud risk: since companies have inventory across many locations, it makes it easier to add fake inventory, lack of third party evidence means it"s easier to overstate inventory. Assess inherent risk for inventory: often concerned with valuing inventory too high or excluding inventory that has been returned or used in cost of goods sold (completeness, cut-off) Inventory is stored in different locations, therefore, counting is difficult. Inventory is easily transported, therefore, can be stolen.