Camilla is preparing the audit program for the inventory of Summers, a large department store. Camilla listed "select a sample of invoices from suppliers to verify that the risks and rewards of the inventory were transferred to Summers." Camilla is concerned that some of the inventory in the store might be on consignment. The account-balance-related objective that Camilla is concerned about is
A) rights and obligation (ownership).
B) accuracy.
C) valuation.
D) existence.

Question

Quizplus · Accepted Answer

The concern of inventory being on consignment relates to the account-balance-related objective of rights and obligation (ownership) because if the inventory is on consignment, Summers does not own it and therefore should not record it as inventory on their balance sheet. By verifying that the risks and rewards of the inventory were transferred to Summers through the sample of supplier invoices, Camilla can ensure that Summers indeed owns the inventory and therefore can record it as such.

Camilla Is Preparing the Audit Program for the Inventory of Summers