(15 points total, 5 points each part). You are the audit senior on a new audit engagement and are responsible to design substantive procedures for Inventorie The client is a private company that is a wholesaler of natural food and personal care prodcts. The client has been in business for just over 15 years and is owne by approximately 125 stockholders. They operate on a calendar year (December 31 year end.) The company's sales in the past three years have been approximate $10 billion and inventories have averaged approximately $1.75 billion. The company has strong internal controls over operations, and it uses current and up to date systems and software to manage its sales, operations, inventories, and financial reporting. The company's control environment and IT controls are stron and your tests of controls (performed in September) have disclosed no significan or material weaknesses. Required: 1. Describe the objective of substantive audit procedures and identify the key assertions that you would test regarding Inventories. 2. Describe substantive audit procedures that you will use for your audit. Be creative and use professional terminology such as inspections, observation, comparison, inquiry, confirmation, recalculation, reperformance, and scanning: Would you use analytical procedures? (You do not have to use all of these tests.) 3. The client wants to close their books and issue the annual report as soon as possible. They will count inventory at the end of November. Can you perform substantive tests of Inventory at November 30 and then perform analytical procedures to "roll forward" the amounts to year end? If so, what types of procedures would you use for the "roll forward"? Would you perform any other substantive tests at December 31 to address cutoff? (15 points total, 5 points each part). You are the audit senior on a new audit engagement and are responsible to design substantive procedures for Inventorie The client is a private company that is a wholesaler of natural food and personal care prodcts. The client has been in business for just over 15 years and is owne by approximately 125 stockholders. They operate on a calendar year (December 31 year end.) The company's sales in the past three years have been approximate $10 billion and inventories have averaged approximately $1.75 billion. The company has strong internal controls over operations, and it uses current and up to date systems and software to manage its sales, operations, inventories, and financial reporting. The company's control environment and IT controls are stron and your tests of controls (performed in September) have disclosed no significan or material weaknesses. Required: 1. Describe the objective of substantive audit procedures and identify the key assertions that you would test regarding Inventories. 2. Describe substantive audit procedures that you will use for your audit. Be creative and use professional terminology such as inspections, observation, comparison, inquiry, confirmation, recalculation, reperformance, and scanning: Would you use analytical procedures? (You do not have to use all of these tests.) 3. The client wants to close their books and issue the annual report as soon as possible. They will count inventory at the end of November. Can you perform substantive tests of Inventory at November 30 and then perform analytical procedures to "roll forward" the amounts to year end? If so, what types of procedures would you use for the "roll forward"? Would you perform any other substantive tests at December 31 to address cutoff
