When there are no perpetual inventory files and inventory is material,
A) an audit cannot be performed, so the auditor must issue a disclaimer.
B) a physical inventory should be taken by the client near the end of the accounting period.
C) the auditor will have to perform the inventory count and determine valuation.
D) the auditor need not observe inventory counts but must do test counts.

Question

Quizplus · Accepted Answer

In the absence of perpetual inventory files, a physical inventory should be taken by the client near the end of the accounting period. This will enable the auditor to determine the existence and valuation of the inventory by performing their own inventory count and testing the client's procedures for counting and valuing inventory. It is not necessary for the auditor to issue a disclaimer or perform test counts if a physical inventory is taken by the client.

When There Are No Perpetual Inventory Files and Inventory Is