California Electronics

Auditors from Jenner and Pratt observed the physical inventory count on the last day of California Electronics fiscal year, July 31, 2020. The auditors identified several variances in the test counts when compared to the clients recorded inventory. The auditors request and obtain explanations from the clients management. Required: For each of the noted variances and the listed client responses, select the audit procedure the auditors are likely to perform from the list of procedures. Each procedure may be used once, more than once, or not at all. (5pts) Possible audit procedures:

1. Inspect supporting documents and agree quantities received to purchase order.
2. Inspect supporting purchase documents for proper shipping terms and receiving information to verify exclusion from inventory count.
3. Inspect supporting purchase documents for proper shipping terms and receiving information to verify inclusion in inventory count.
4. Inspect supporting sale and shipment documentation for proper shipping terms for exclusion in inventory count.
5. Inspect supporting sale and shipment documentation for proper shipping terms for inclusion in inventory count.
6. Request that client make appropriate correction to record additional inventory.
7. Request that client make appropriate correction to reduce inventory.

Test Count Number	Inventory Item	Recorded Inventory Quantity	Auditor Test Count	Variance	Client Explanation	Auditor Procedure
1	Printers	175	125	(50)	Inventory in transit shipped f.o.b. shipping point; received 11/2/2020
2	Flash Drives	850	715	(135)	Inventory sold to customer f.o.b. destination; not received by customer until 11/2/2020
3	Laptops	200	225	25	Sale recorded based on customer request to hold items. Customer has not paid or picked items up yet.
4	Headphones	455	500	45	Inventory received 10/30/2020; vendor shipment receipt not recorded.
5	Keyboards	650	550	(100)	Inventory was separated for an 11/1/2020 sale; held on dock for customer pickup.