Auditing and Assurance Services (16th Edition)

question 7-29

objective (7-4) The following audit procedures were performed in the audit of inventory to satisfy specific balance-related audit objective as discussed in chapter 6. The audit procedures assume that the auditor has obtained the inventory count sheets that list the clients inventory. The general balance-related audit objectives from chapter 6 are also included.

Audit procedures

1) select a sample of inventory items in the factory warehouse and trace each item to the inventory count sheets to determine if it has been included and if the quantity and description are correct.

2) trace selected quantities from the inventory list to the physical inventory to make sure that it exists and the quantities are the same.

3) compare the quantites on hand and unit prices on this years inventory count sheets with those in the preceding year as a test for large differences.

4) test the extension of unit prices times quantity on the inventory list for a sample of the inventory items, test foot the list, and compare the total to the general ledger.

5) send letters directly to third parties who hold the clients inventory, and request that they respondf directly to the auditors.

6) examine sales invoices and contracts with customers to determine whether any goods are out on consignment with customers. Similarly, examine vendors in-voices and contracts with vendors to determine whether any goods on the inventory listing are owned by vendors.

7) question operating personnel about the possibility of obsolete or slow-moving inventory.

General balance-related audit objective

existence,completeness,accuracy,classification,cutoff,detail tie-in,realizable vaule,rights and obligations

a) identify the type of audit evidence used for each aduit procedure.

b) identify the general balance-related audit objective or objectives satisfied by each audit procedure.