ACCA Audit and Assurance (F8) Practice Exam

What is a control measure for inventory accounting?

1. Random sales checks

2. Sequential numbers on invoices

3. Regular budget reviews

4. Management performance reviews

The correct answer is: Sequential numbers on invoices

Sequential numbers on invoices serve as an effective control measure for inventory accounting as they help ensure the accuracy and completeness of inventory records. By using sequential numbering, an organization can easily track all invoices issued, which aids in the prevention of errors such as duplicate entries or missed transactions. This systematic approach also facilitates reconciliation of inventory records with financial statements, as any gaps or anomalies in the sequence can quickly indicate potential issues or discrepancies that need to be investigated. In contrast, while random sales checks, regular budget reviews, and management performance reviews are all useful for overall financial oversight and operational management, they do not specifically address the unique challenges of inventory accounting. Random sales checks may verify sales but do not directly link to inventory tracking. Regular budget reviews focus on financial performance relative to budgets rather than detailed inventory control. Management performance reviews assess organizational effectiveness and efficiency but do not provide a mechanism for ensuring accurate inventory accounting. Thus, sequential numbering is the most targeted method for enhancing control over inventory accounting processes.