(Solution) An auditor is conducting an audit of the financial statements of a wholesale cosmetics distributor with an inventory consisting of thousands of... > Snapessays.com


(Solution) An auditor is conducting an audit of the financial statements of a wholesale cosmetics distributor with an inventory consisting of thousands of...


An auditor is conducting an audit of

 

the financial statements of a wholesale cosmetics distributor with an inventory consisting

 

of thousands of individual items. The distributor keeps its inventory in its own distribution

 

center and two public warehouses. An inventory computer file is maintained on a computer

 

disk and at the end of each day the file is updated. Each record of the inventory file

 

contains the following data:

 

1. Item number

 

2. Location of item

 

3. Description of item

 

[792] PART 4 / AUDITING THE TRANSACTION CYCLES

 

4. Quantity on hand

 

5. Cost per item

 

6. Date of last purchase

 

7. Date of last sale

 

8. Quantity sold during year

 

The auditor is planning to observe the distributor’s physical count of inventories as of a

 

given date. The auditor will have available a computer tape of the data on the inventory

 

file on the date of the physical count and a general-purpose computer software package.

 

Required

 

The auditor is planning to perform inventory substantive tests. Identify the inventory tests

 

and describe how use of the general-purpose software package and the tape of the inventory

 

file data might be helpful to the auditor in performing such tests. (Hint: You may wish

 

to refer to Chapter 12 as well as this chapter in answering this question.) Organize your

 

answer as follows:

 

INVENTORY Substantive Test

 

1. Observe the physical count, making

 

and recording test counts when

 

applicable.

 

 

How Generalized Audit SOFTWARE MIGHT BE HELPFUL

 

SUBSTANTIVE TEST FOR SUBSTANTIVE TESTS

 

1. Determine which items are to be test

 

counted by selecting a random sample

 

of a representative number of

 

items from the inventory file as of the

 

date of the physical count.

 


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This question was answered on: Sep 21, 2023

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