Physical controls over inventory are typically tested for operating effectiveness by:
A) confirmation.
B) observation.
C) walkthrough.
D) reconciliation.

Question

Quizplus · Accepted Answer

Physical controls over inventory involve actual physical checks to ensure the existence and condition of inventory. Therefore, the best way to test their operating effectiveness is through observation, where the auditor physically inspects the inventory to ensure that it matches the records. Confirmation, walkthroughs, and reconciliations may be used to test other types of controls, but not those related to physical inventory management.

Physical Controls Over Inventory Are Typically Tested for Operating Effectiveness