21-19 (Objectives 21-1, 21-4, 21-5, 21-6) The following questions deal with tests of details of balances and analytical procedures for inventory. Choose the best response.

(4) Examine documentation supporting the acquisition of highly material inventory items on hand at the count date.

b. An inventory turnover analysis is useful to the auditor because it may detect

(1) inadequacies in inventory pricing.

(2) methods of avoiding cyclical holding costs.

(3) the existence of obsolete merchandise.

(4) the optimum automatic reorder points.

c. A CPA auditing inventory may appropriately apply attributes sampling to estimate the (1) average price of inventory items.

(2) percentage of slow-moving inventory items.

(3) dollar value of inventory.

(4) physical quantity of inventory items.

21-20 (Objectives 21-1, 21-3, 21-5, 21-6, 21-7) Items 1 through 8 are selected questions typically found in questionnaires used by auditors to obtain an understanding of internal control in the inventory and warehousing cycle. In using the questionnaire for a client, a