In order for an auditor to test ownership of a client's inventories, each of the following substantive tests of details of account balances are appropriate except:
A) review loan agreements for inventory that has been pledged or assigned.
B) review sales agreements for bill-and-hold arrangements.
C) review contracts for inventory held on consignment.
D) review policy for asset impairment write-downs.

Question

Quizplus · Accepted Answer

Reviewing the policy for asset impairment write-downs is not an appropriate test for ownership of inventories. The other options (reviewing loan agreements for inventory that has been pledged or assigned, reviewing sales agreements for bill-and-hold arrangements, and reviewing contracts for inventory held on consignment) are appropriate tests for ownership of inventories.

In Order for an Auditor to Test Ownership of a Client's