During the performance of analytical procedures on Lollipop Company's financial ratios, Blueberry, the auditor assigned, noticed that the inventory turnover days was significantly higher than the industry average. Because of this variance, Blueberry decided to inquire with the finance manager of Lollipop regarding possible explanations. Which justification provided by the finance manager should Blueberry mostly rely on in assessing risk of material misstatement of inventories? We have a lot of obsolete inventories as we have introduced new products recently. However, we already have a plan to dispose of these obsolete inventories Lollipop Company uses a different accounting method than the majority of our competitors. That is why our inventory amount reported is lower and is thus giving us a higher inventory turnover in days. As compared to other players in the same industry, Lollipop is smaller in size. That is why we have longer inventory turnover days. Lollipop Company was the defendant in a lawsuit for the year being audited. This led to poor sales performance and low inventory turnover. Johnny and Rebecca are discussing the different types of evidence they plan to collect as part of the audit of a major client; a large, decentralized firm with operations all over the continental United States. There has been some disagreement between Johnny and Rebecca as to which types of audit evidence might be considered the most reliable, so they have approached you, their supervisor, to settle the dispute. Which of the following responses would be the most appropriate in this scenario? Generally accepted auditing standards provide strict guidelines on what types and the quantity of evidence that must be collected for each assertion. Evidence obtained from senior management and the internal audit function is generally considered the most reliable, as these parties have the most knowledge of the client. The legitimacy and reliability of the audit evidence will be determined by how and from whom it was gathered. For example, evidence obtained externally is usually more reliable than evidence obtained internally. All audit evidence, regardless of how it was gathered and from whom it was gathered is legitimate and compelling, and represents sufficient, appropriate audit evidence. During the audit of Seagrave Enterprises, LLC, a retailer of fishing and other maritime sporting equipment throughout the east coast of the United States, the external auditors, Peabody CPAs, are examining the education, experience, and qualifications of employees in key positions. The auditors have determined that these employees are competent and well qualified for their respective positions. What actions might the auditor take in response to this finding? The auditors are likely to access the client's control environment as high, and decrease audit risk accordingly. The auditor is likely to increase control risk, and focus substantive testing on areas such as cash receipts and disbursements. The auditors are likely to decrease audit risk and the risk of material misstatement. The auditors are likely to decrease audit risk and increase the resultant risk of material misstatement