Read the overview below and complete the activities that follow.

When auditing inventory and cost of goods sold, auditors select the most appropriate procedures for the audit but typically follow the same general pattern.

CONCEPT REVIEW:

While selection of the most appropriate procedures for an audit will be guided by the nature of the internal controls, auditors typically follow the same general pattern of work.

1. Inventories are often a large _____ asset of a company's balance sheet.

2. Inventories are often a large _____ asset of a company's balance sheet.

3. The determination of the value of ending inventory ____ affects net income.

4. When testing controls around inventory, auditors are considering the ________transaction cycle.

5. An important step of testing controls is comparing quantity and _______ in the invoice, purchase order, and receiving report.