In obtaining an understanding of a manufacturing entity's internal control concerning inventory balances, an auditor most likely would:

Question

Quizplus · Accepted Answer

Choice "A" is correct. In obtaining an understanding of a manufacturing entity's internal control concerning inventory balances, an auditor would most likely review the entity's descriptions of inventory controls. Choice "B" is incorrect. Performing test counts of inventory during the entity's physical count is a substantive procedure performed after obtaining an understanding of internal control. Choice "C" is incorrect. Analyzing inventory turnover statistics to identify slow-moving and obsolete items is a substantive procedure performed after obtaining an understanding of internal control. Choice "D" is incorrect. Analyzing monthly production reports to identify variances and unusual transactions is a substantive procedure performed after obtaining an understanding of internal control.

In Obtaining an Understanding of a Manufacturing Entity's Internal Control