COMM 455 Chapter Notes - Chapter 11: Remittance, Audit Risk, Financial Statement

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26 Dec 2015
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Ensure that inventory actually exist, are owned, and properly valued. 11. 2 custody of inventory and maintenance of inventory. Merchandising entity inventory consists of goods acquired for resale. Manufacturing entity inventory consists of raw materials, work in process and finished goods: need to have a system that can track movement of goods through production process. Computerized records are easier to maintain as perpetual inventory records and typically include detailed records including quantities and values. Important control: segregation of inventory record function from the physical custody: prevents the opportunity to conceal inventory shortages by manipulating the records. For goods received, the initialled receiving report indicates acknowledgement of receive of goods, their quantity and related cost. Shipping documents serve as the authorization of the release of goods from inventory and the entry to reduce inventory on hand. Perpetual inventory records need to be compared to actual inventory at regular intervals. A comparison of actual items on hand to inventory records.

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