Professional Documents
Culture Documents
1st Question
1. The following audit procedures were performed in the audit of inventory to satisfy specific
balance-related audit objectives. The audit procedures assume that the auditor has obtained
the inventory count sheets that list the client’s inventory.
Audit Procedures
a. 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.
b. Trace selected quantities from the inventory list to the physical inventory to make sure that
it exists and the quantities are the same.
c. Compare the quantities on hand and unit prices on this year’s inventory count sheets with
those in the preceding year as a test for large differences.
d. Test the extension of unit prices times quantity on the inventory list for a sample of
inventory items, test foot the list, and compare the total to the general ledger.
e. Send letters directly to third parties who hold the client’s inventory, and request that they
respond directly to the auditors.
f. 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 inven- tory listing are owned by
vendors.
g. Question operating personnel about the possibility of obsolete or slow-moving inventory.
General Balance-Related Audit Objectives
- Existence
- Completeness
- Accuracy
- Classification
- Cutoff
- Detail tile-in
- Realizable Value
- Right and Obligation
Question:
1. Identify the type of audit evidence used for each audit procedure.
2. Identify the general balance-related audit objective or objectives satisfied by each audit
procedure
2nd Question
a. Distinguish between a qualified opinion, an adverse opinion, and a disclaimer of opinion, and
explain the circumstances under which each is appropriate.
b. Internal control is geared to the achievement of objectives in one or more separate over
lapping categories. Give an example for each objectives of internal control goals for
manufacturing industry.