审计学学习指导(21).docxVIP

Chapter 21 Audit of the Inventoryand Warehousing Cycle We find Chapter 21 difficult for students to understand because of the chapters emphasis on auditing the inventory of a manufacturing company. It works better to discuss the audit of inventory for a retail or wholesale company. At the end of the chapter, we bring in the complexities caused when inventory is manufactured rather than purchased. The following are topic areas we cover: Chapter opening vignette Differences between inventory and other audit areas How e-commerce affects inventory management Parts of the audit of inventory Physical observation Audit of pricing and compilation Integration of the tests Chapter Opening Vignette - “Phantom Inventory ” This vignette revolves around the well-known financial statement fraud at Phar- Mor whereby senior management recorded fictitious inventory and manipulated inventory values to overstate inventory and understate cost of goods sold. We use the vignette to illustrate the challenges associated with auditing clients who have massive amounts of inventory items located in numerous locations. As students visualize the volume of products carried by a retail chain like Phar-Mor, they quickly recognize the opportunities management might have to manipulate inventory values. The vignette also provides a nice opportunity to integrate discussions about sample sizes for tests of details (from Chapter 17). Discussion about the auditor on to s decisi only visit four of 300 stores and the auditor s advance disclosure of the locations to be visited help integrate sampling concepts into this chapter s focus on audit issues related to inventory. Differences Between Inventory and Other Audit Areas In this section, we briefly ask students to identify the major differences between the audit of inventory and an account such as accounts receivable. How E-Commerce Affects Inventory Management (page 698) We then discuss how companies are using the Internet to provide access to invent