14

Renee and Deana are discussing the audit of inventory accounts one day after work at a local coffee shop. Renee is a new auditor with the CPA firm and Deana has been assigned as her mentor. Renee asks Deana if she can provide her with an overview of auditing a client's inventory accounts. Which of the following would be the most appropriate response from Deana? The auditing of a client's inventory accounts is generally pretty standardized. We always test the same assertions and run into the same errors, thus it is not overly complicated. The level of complexity pertaining to the client's inventory accounts really depends on the type of company. For example, a manufacturing company will involve a more complex audit than a service company. There is a large amount of variance in different audit clients' inventory accounts; even for clients within the same industry. For example, inherent risk is always higher for clients using FIFO inventory costing compared to LIFO inventory costing. We generally follow the same audit plan as the previous year. If we are auditing a first-time client, then we are required to obtain assurances from senior management pertaining to inventory accounts for inclusion in the permanent audit file