2. You are auditing the financial statements of a cosmetics distributor that sells thousands of individual items. The distributor keeps its inventory in its distribution center and in two public warehouses. At the end of each business day, it updates its inventory file, whose records contain the following data:

Item number	Cost per item
Item description	Date of last purchase
Quantity-on-hand	Date of last sale
Item location	Quantity sold during year

You will use audit software to examine inventory data as of the date of the distributors physical inventory count. You will perform the following audit procedures:

Observe the distributors physical inventory count at year-end and test a sample for accuracy.

Compare the auditors test counts with the inventory records.

Compare the companys physical count data with the inventory records.

Test the mathematical accuracy of the distributors final inventory valuation.

Test inventory pricing by obtaining item costs from buyers, vendors, or other sources.

Examine inventory purchase and sale transactions on or near the year-end date to verify that all transactions were recorded in the proper accounting period.

Ascertain the propriety of inventory items located in public warehouses.

Analyze inventory for evidence of possible obsolescence.

Analyze inventory for evidence of possible overstocking or slow-moving items.

Test the accuracy of individual data items listed in the distributors inventory master file.

Describe how the use of the audit software package and a copy of the inventory file data might be helpful to the auditor in performing each of these auditing procedures.