It is important for auditors to be on-location on the last day of the client's fiscal year when the client
A) operates a restaurant that does a considerable amount of business on New Year's Eve.
B) has significant inventory activities such that the receipts and shipments of inventories at year-end should be observed.
C) relies upon electronic verification to indicate the timing of transactions.
D) refuses to pay overtime rates for the audit team during its busy season.

Question

Quizplus · Accepted Answer

Being on-location on the last day of the client's fiscal year is important when the client has significant inventory activities that need to be observed. This is because auditors need to physically verify the existence and valuation of inventory in order to ensure accuracy of the financial statements. The other options (operating a restaurant on New Year's Eve, relying on electronic verification, and refusing to pay overtime rates) do not necessarily require auditors to be on-location on the last day of the fiscal year.

It Is Important for Auditors to Be On-Location on the Last