If the auditor concludes that the physical controls over inventory are so inadequate that inventory will be difficult to count,the auditor should
A)inquire of management the additional controls that can be put in place to enable a better count to be carried out.
B)conduct additional control tests over the pricing and compilation of inventory to obtain a higher degree of accuracy.
C)rely on the perpetual inventory master files rather than the physical count.
D)expand the observation of physical inventory tests to ensure that an adequate count is carried out.

Question

Quizplus · Accepted Answer

If the auditor determines that physical controls over inventory are inadequate, it is important to expand the observation of physical inventory tests to ensure a more accurate count. This may involve testing a larger sample size, performing additional procedures to verify the existence and condition of inventory, and confirming the accuracy of any perpetual inventory records. Inquiring about additional controls or relying solely on perpetual inventory records may not provide the necessary assurance and could result in a material misstatement of inventory. Conducting control tests over pricing and compilation may also not address the issue of inadequate physical controls.

If the Auditor Concludes That the Physical Controls Over Inventory