Nadya Ayundani

01017210061

21 - 25
1. Colburn Pharmacy, Inc., has 77 stores located in the New England area. Approximately 60
percent of the inventory recorded on the balance sheet for the consolidated company is located ,
which are in Boston, MA, and Hartford, CT. The remainder of inventory is spread across the 77
stores. The highdollar- value items in the inventory consist of prescription drugs that are stored in
secure areas both in the distribution centers and at the individual stores.
2. Zenith, Inc., manufactures high-end motorcycles in production facilities located in Pennsylvania
and Wisconsin. During 2014, the company also opened major production facilities in India and
Brazil. Each production facility receives raw materials that are then assembled into motorcycles.
Manufactured motorcycles are stored at the production facilities until orders are received from
dealers.
3. Texide Electronics manufactures component parts that are used in their customers’ computer
and other electronic products. Given that customer products differ, each of Texide’s products is
designed uniquely for each customer’s production process. Individual parts are quite small, and
the interior components are not visible to the human eye. All inventory items are stored in Texide’s
only manufacturing plant.
4. Food Giant is a regional grocery store chain located in the Pacific Northwest. Rather than operate
a company-owned distribution center, Food Giant uses five different independent storage
warehouse companies across the region to store most of its grocery inventory before shipping to
the individual stores. Typically, about 75 percent of the inventory is located at the storage
warehouses, with the remaining inventory located at one of Food Giant’s 42 stores.

a. For each independent client scenario, describe issues the auditor should consider when
determining which locations to visit to physically observe the client’s inventory count.
STORE ISSUES
Colburn Pharmacy Persediaan Colburn Pharmacy terdapat di banyak lokasi dan juga
memiliki high material/value items, yang disimpan di tempat yang
aman
Zenith, Inc Auditor kesulitan to conducting a tour of the client’s inventory
facilitied, termasuk penerimaan, penyimpangan, produksi,
planning, dan record-keeping areas dikarenakan tempat produksi
Zenith, Inc yang terletak di negara yang berbeda dan Zenith, Inc
menggunakan metode just-in-time (JIT) inventory.
Texide Electronics Sulit untuk menghitung barangnya dikarenakan komponen
produknya yang kecil sehingga bisa saja terjadi misstatement
Food Giant Food Giant menggunakan 5 gudang yang berbeda di seleruh
daerah, bukan menggunakan company-owned distribution center

b. How would you determine which locations to visit?

Nadya Ayundani
01017210061

Dalam menentukan lokasi mana yang akan dikunjungi, jika dilihat dari risk yang besar,
Texide Electronics wajib untuk dilakukan physical observation of inventory dikarenakan
komponen elektornik yang diproduksi ukurannya sangat kecil dan diproduksi secara job-
order costing system, sehingga untuk menghindari misstatement. Auditor juga concern
terhadap misstatements jika inventory is stored in multiple locations such Colburn
Pharmacy.

c. For each scenario, how does the type of inventory create potential risks of material
misstatements in the inventory balances?
ISSUES POSSIBLE MISSTATEMENT
Colburn Pharmacy : The client has rights to inventory recorded on tags (rights),
Multiple Location Inventory tidak ditandai sebagai exist (existence), prosedur
physical counting tidak selesai/memenuhi standar (completeness),
membutuhkan waktu yang lama,
Zenith, Inc : Use Just-In- Inventory tidak diklasifikasikan dengan benar (classification),
Time Inventory obsolence and unusable inventory items are included (realizable
value)
Texide Electronics : Tidak dicatat dan dihitung secara akurat (accuracy), Inventory
Memproduksi produk yang tidak ditandai sehingga ada kemungkinan missing (completeness)
sulit dihitung
Food Giant : Inventory The client has rights to inventory recorded on tags (rights),
stored in outside not in the Inventory tidak ditandai sebagai exist (existence)
center

d. How might the auditor address the risks noted in part c.?
ISSUES COMMENTS
Colburn Pharmacy Observe whether movement of inventory takes place during the
count, understanding the client’s business dan industry inventory,
inquire as to inventory in other location, examine inventory to
make sure it is tagged.
Zenith, Inc Evaluate whether the percent of completion recorded on the tags
for WIP is reasonable, Test for obsolete inventory by inquiry of
factory employees and management and alertness for items that
are damaged, rust or dust-covered, or located in inappropriate
places.
Texide Electronics Compare physical counts with perpetual inventory master file,
record client’s counts for subsequent testing
Nadya Ayundani
01017210061

Food Giant Inquire about consignment or customer inventory included on

client’s premises, be alert for inventory that is set aside or
specifically marked as indications of non-ownership.

21 – 26

a. Calculate the following ratios, using an electronic spreadsheet program (instructor’s option):
(1) Gross margin as a percentage of sales
2016 2015 2014 2013
26.2% 22.5% 22.4% 22.4%

(2) Inventory turnover

2016 2015 2014 2013
8.92 9.86 9.8 10.23

b. List several logical causes of the changes in the two ratios.

Gross Margin Inventory Turnover
- Meningkatkan selling prices tanpa adanya - Lebih banyak barang yang terjual
peningkatan pada cost of sales - Jika ada penurunan permintaan (demand),
- Disebabkan oleh ending inventory yang maka akan menurunkan inventory
tinggi turnover
- Metode accounting for inventory berubah

c. Assume that $2,000,000 is considered material for audit planning purposes for 2016. Do any of
the fluctuations in the computed ratios indicate a possible material misstatement? Demonstrate this
by using the spreadsheet program to perform a sensitivity analysis.
26.2% - 22.5% % = 3.7% increase of gross margin
3.7% x sales of $92.8 million = $3.433.600 potential misstatement of sales

$68.4 million/9.86 inventory turnover = $6.93 million

11.6 million - $6.93 million = $4.67 million
Keduanya menunjukan adanya potensi misstatement lebih dari $2,000,000

d. What should the auditor do to determine the actual cause of the changes?
Auditor harus meminta klien untuk menggunakan prosedur yang sesuai standar sehingga tidak lagi
terjadi misstatement.