Which of the following would the auditor most likely do when testing the existence assertion for inventory?
A)Observe the client's count of the annual physical inventory and perform test counts.
B)Review vendor invoices for the amounts recorded.
C)Review open purchase orders at year-end.
D)Trace raw material purchases to invoices and to the general ledger.

Question

Quizplus · Accepted Answer

When testing the existence assertion for inventory, the auditor would typically observe the client's count of the annual physical inventory and perform test counts to ensure that the inventory actually exists and to verify that the client's count is accurate. This helps to ensure that the inventory recorded in the client's books actually exists and that the amounts recorded are accurate. Reviewing vendor invoices (choice B) would help to test the completeness assertion, while reviewing open purchase orders (choice C) would help to test the cutoff assertion. Tracing raw material purchases to invoices and the general ledger (choice D) would help to test the occurrence assertion for raw material purchases, but would not necessarily provide direct evidence for the existence assertion for finished inventory.

Which of the Following Would the Auditor Most Likely Do