Inventory is often a significant part of a company's current assets. Because of its importance,
A) auditors are required by auditing standards to observe the client taking a physical inventory count.
B) price tests must be performed to verify whether the physical counts were correctly summarized.
C) companies are required to use perpetual inventory systems.
D) auditors are required by auditing standards to take the physical inventory for the client.

Question

Quizplus · Accepted Answer

Auditors are required by auditing standards to observe the client taking a physical inventory count to obtain sufficient and appropriate audit evidence about the existence and condition of inventory, as well as to confirm its ownership and valuation. This helps reduce the risk of material misstatements in the financial statements related to inventory. Price tests, perpetual inventory systems, or auditors taking physical inventory are not necessarily required by auditing standards.

Inventory Is Often a Significant Part of a Company's Current