LIST OF AUDIT PROCEDURES PERFORMED FOR INVENTORY Audit Procedure Management Asse

Question

LIST OF AUDIT PROCEDURES PERFORMED FOR INVENTORY Audit Procedure Management Assertion (a) The auditor determined that pledged inventory was (b) The auditor confirmed goods held by the client in a public (c) The auditor performed a purchases cutoff test to assure all identified in a note. warehouse. purchase transactions for the year were included in the balance (d) The auditor accounted for the numerical sequence of (e) The auditor vouched the recorded payables to receiving (f) The auditor determined that accounts payable was purchase orders. documents presented on the balance sheet as a current liability. (g) The auditor observed the taking of the physical inventory (h) The auditor performed an analytical procedure comparing this year's balance of payables with the previous year's (i) The auditor reconciled the total payables from the subsidiary ledger to the balance in the general ledger G) The auditor compared the recorded inventory costs to the replacement costs of inventory. REQUIRED: For each of the audit procedures listed, indicate the primary management assertion that is being tested by the procedure. Each assertion may be used once, more than once, or not at all. Be sure to list only one assertion, the most likely assertion being tested

Explanation / Answer

All inventory have been reported in balance sheet – Completeness Assertion All existing goods held by client are accounted and kept in public warehouse- Rights & Obligation Assertion Purchase transactions have been recorded in the appropriate accounts, without errors – Completeness Assertion All purchase orders have been appropriately reported – Existence Assertion Recorded accounts payable exists – Existence Assertion All accounts payable have been accurately reported in balance sheet – Valuation Assertion All existing inventory has been correctly accounted to. - Accuracy Assertion The current year’s balance of payables are 2% lower than that recorded last year – Valuation Assertion Disclosures related to total payables have been done in general ledger – Cut off Assertion All inventory units that should have been recorded, have been recognized in the financial statements – Existence Assertion

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