In May 2017, the PCAOB issued PCAOB Release No. 105-2017-027, which is a settled disciplinary order. Obtain a copy of this Release from the PCAOB website.

a. This disciplinary order notes that the firm and the auditor violated PCAOB rules and standards in connection with the firm’s audits of two issuer clients. Specifically, there was a failure to exercise due professional care, including professional skepticism, and a failure to perform audit procedures to obtain sufficient appropriate audit evidence. Describe the failures that relate to auditing inventory accounts.

b. What audit procedures related to inventory should the auditor have performed?

c. Why do you think that these inventory-related deficiencies occurred?