CIM Inventory Auditing & Data Accuracy 4 — Questions and Answers
Question 1: Which of the following is NOT a common cause of inventory record inaccuracy?
- Unrecorded shrinkage or theft
- Receiving errors where wrong quantities are keyed
- Employees following standard operating procedures (Correct answer)
- Transaction timing delays in the WMS
Correct answer: Employees following standard operating procedures
Following SOPs is a control that prevents errors; unrecorded shrinkage, receiving keying mistakes, and timing delays are all root causes of inaccuracy.
Question 2: A 'tag control' system during a physical inventory ensures that:
- All items are tagged with price labels before counting
- Every count tag is accounted for to prevent missed or double-counted locations (Correct answer)
- Items are color-coded by ABC classification
- Tags replace the WMS during the count period
Correct answer: Every count tag is accounted for to prevent missed or double-counted locations
Tag control tracks the serialized count tags issued and returned so auditors can verify no locations were skipped or counted twice.
Question 3: What is the purpose of 'cutoff control' procedures during a physical inventory?
- To limit which employees can participate in counting
- To freeze or carefully track transactions during the count so receipts and shipments don't distort count results (Correct answer)
- To cut off access to the WMS during counting
- To eliminate slow-moving items before the count
Correct answer: To freeze or carefully track transactions during the count so receipts and shipments don't distort count results
Cutoff control ensures that inventory movements occurring during the count period are properly segregated so the count reflects a consistent point-in-time snapshot.
Question 4: An RFID-based inventory system provides an advantage over traditional barcode scanning for audits primarily because:
- RFID tags are cheaper to produce
- RFID can read multiple tags simultaneously without line-of-sight (Correct answer)
- RFID eliminates the need for any physical count
- RFID works only for high-value A-class items
Correct answer: RFID can read multiple tags simultaneously without line-of-sight
RFID readers can capture hundreds of tags per second without requiring direct line-of-sight, dramatically speeding up large-area inventory verification.
Question 5: When calculating inventory accuracy at the location level rather than the SKU level, which additional error type becomes visible?
- Vendor lead time errors
- Misput and bin-level allocation errors (Correct answer)
- Purchase order discrepancies
- Customer return fraud
Correct answer: Misput and bin-level allocation errors
Location-level accuracy reveals misput errors where correct quantities exist in the wrong bin — these are invisible when accuracy is only measured at the SKU total level.
Question 6: A warehouse manager notices that inventory accuracy drops significantly after every holiday season peak. The most likely root cause is:
- Equipment malfunction during cold weather
- Increased use of temporary workers unfamiliar with receiving and putaway procedures (Correct answer)
- Higher theft rates in December
- Supplier sending wrong items
Correct answer: Increased use of temporary workers unfamiliar with receiving and putaway procedures
Temporary workers hired for peak season typically lack training in WMS transaction procedures, leading to receiving keying errors and incorrect putaway scans.
Question 7: In auditing inventory valuation accuracy, the FIFO (First-In, First-Out) costing method ensures that:
- The most recently purchased items are expensed first
- Oldest inventory costs are recognized in cost of goods sold first (Correct answer)
- Average costs are applied to all units equally
- The highest-cost items are sold first to maximize gross profit
Correct answer: Oldest inventory costs are recognized in cost of goods sold first
Under FIFO, the cost of the earliest purchased units flows to COGS first, leaving newer (often higher) costs in ending inventory.
CIM Inventory Auditing & Data Accuracy 4
Which of the following is NOT a common cause of inventory record inaccuracy?