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 year-end.
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

When there are no perpetual inventory files and inventory is material, the auditor should recommend the client to take a physical inventory near year-end. This will help the auditor to determine the existence, completeness, and valuation of inventory. The auditor should also perform test counts to ensure the accuracy of the physical inventory. However, if the client is unable to take a physical inventory, the auditor may have to issue a disclaimer or qualified opinion.

When There Are No Perpetual Inventory Files and Inventory Is