Audit of Inventory. During the month of April, Alexander Kuznetsov, Auditor, is engaged to audit the balance sheet of a new client, Kholst Katok Company of Yaroslavl, Russia, as of 31 March. Kholst Katok manufactures speciality items made of linen. A physical count of all inventories is made at the end of each quarter of the fiscal year, and the company adjusts its inventory book amounts to reflect the physical counts. As Kuznetsov was not engaged at the time of the physical inventory on 31 March, Kuznetsov requests that the company make another physical inventory count at the end of April in order that Kuznetsov may observe and make test counts. Kholst Katok agrees, and another inventory is taken on 30 April which Kuznetsov witnesses.

Inventories of raw materials, work in process, and finished goods totalled Russian Roubles

(Roubles) 125,000 at 31 March. Total current assets amounted to Roubles 188,000, total current liabilities were Roubles 186,000, and total assets were Roubles 450,000.

Kholst Katok maintains perpetual inventory records of raw materials and supplies, but has no job cost system or perpetual records of work in progress or finished goods. Production records are kept in the plant showing the tons of castings poured each day, and sales records reflect the tons of castings and forgings sold daily to various customers of the company.
Required
A. What audit procedures would Kuznetsov use to satisfy himself as to the quantities on hand at balance sheet date?
B. Assuming that the results of Kuznetsov’s tests of inventories are satisfactory, would Kuznetsov issue an audit report unqualified as to opinion and scope of the audit, in view of the fact that Kuznetsov were not on hand to observe inventories at 31 March? Give reasons for your answer. (Limit your discussion to a consideration of the inventory problem.)