The retailer sells running shoes and regularly accepts that suppliers send goods on consignment in addition to goods purchased. It is a way for suppliers to test new products without the entity taking any risk in purchasing them.

The clerk puts a yellow price tag for these goods on consignment. Other goods have a white price tag.

 

On year-end, clerks doing the inventory count make two different lists: one is for white tags (list #1) and the other for yellow tags.

 

The auditor is planning for two audit procedures:

1) Compare the total of list #1 with the balance presented for "Inventory" 

2) Select a few items from list #1 and check if they are on the shelves

 

Required:

1) Identify the potential errors regarding inventory on year-end in this specific case

2) For each potential error identified, what is the assertion at stake? 

3) What do you think about audit procedures planned for by the auditor?

4) Are they adequate or not? 

5) If your conclusion is negative, what do you suggest?