Rather than counting the entire inventory at year-end, a company may make periodic, or cycle counts, of selected inventory items at various times during the year. Which of the following is necessary if the auditor plans to observe inventories at interim dates?
A) Complete recounts by independent teams are performed.
B) Perpetual inventory records are maintained.
C) Unit cost records are integrated with production accounting records.
D) Inventory balances are rarely at low levels.

Question

Quizplus · Accepted Answer

Perpetual inventory records are necessary if the auditor plans to observe inventories at interim dates. These records provide the auditor with real-time information about the quantity and value of inventory on hand, which allows them to verify inventory balances without having to perform a complete physical count at year-end.

Rather Than Counting the Entire Inventory at Year-End, a Company