To ensure that a client's raw materials, work-in-process, and finished goods inventories are physically protected from theft or damage, an auditor could perform a test of controls such as:
A) selecting a sample of inventory items from the inventory records and inspecting them for consistency with the category of records.
B) reviewing the company's inventory policies for adherence to GAAP.
C) observing the client's physical inventory count to assess whether the company's procedures are being followed.
D) touring the storage and production facilities and observe the security procedures in place.

Question

Quizplus · Accepted Answer

The best choice to ensure physical protection of inventories is to tour the storage and production facilities and observe the security procedures in place. This will allow the auditor to assess the adequacy of the company's security measures and identify potential weaknesses or areas for improvement. Choice A is more relevant to testing the completeness and accuracy of inventory records, while Choice B relates to assessing the accounting treatment of inventory. Choice C may provide some insight into whether inventory procedures are being followed, but it does not necessarily guarantee physical protection of the inventory.

To Ensure That a Client's Raw Materials, Work-In-Process, and Finished