Which of the following would the auditor most likely do when testing the existence assertion for inventory?
A)Observe the client's count of the annual physical inventory and test count.
B)Review vendor invoices for the amounts recorded.
C)Perform year-end tests of invoices received in the final month.
D)Trace raw material purchases to invoices and to the general ledger.

Question

Quizplus · Accepted Answer

When testing the existence assertion for inventory, the auditor would most likely observe the client's count of the annual physical inventory and perform test counts. This helps the auditor ensure that the inventory actually exists and is accurately counted and recorded by the client. Reviewing vendor invoices (B) would be more relevant when testing the completeness assertion for inventory. Performing year-end tests of invoices (C) would be more relevant when testing the cutoff assertion for accounts payable. Tracing raw material purchases (D) would be more relevant when testing the existence and completeness assertions for raw materials inventory.

Which of the Following Would the Auditor Most Likely Do