When perpetual inventory records are maintained in quantities and in dollars and internal control over inventory is weak, the auditor would probably:
A)want the entity to schedule the physical inventory count at the end of the year.
B)insist that the entity perform physical counts of inventory items several times during the year.
C)increase the extent of tests for unrecorded liabilities at the end of the year.
D)have to disclaim an opinion on the income statement for that year.

Question

Quizplus · Accepted Answer

When internal control over inventory is weak, there is a higher risk of misstatements in the perpetual inventory records. Therefore, the auditor would want to schedule a physical inventory count at the end of the year to verify the accuracy of the records and ensure that the inventory is properly valued. This would allow the auditor to perform substantive procedures to test the completeness and accuracy of the inventory recorded in the financial statements. Option B is not the best choice because performing physical counts several times during the year may not be practical or cost-effective. Option C is not relevant to the issue of weak internal control over inventory. Option D is not necessary unless the misstatements in inventory have a pervasive effect on the financial statements.

When Perpetual Inventory Records Are Maintained in Quantities and in Dollars