“If the auditors can determine that all goods in the physical inventory have been accurately counted...

“If the auditors can determine that all goods in the physical inventory have been accurately counted and properly priced, they will have discharged fully their responsibility with respect to inventory.” Evaluate this statement.

Solutions

Expert Solution

Alongwith the above mentioned physical verification of inventory counts and inventory pricing, the auditor has other responsibilities too which involves the following:

* The auditor may evaluate the procedure followed by the management in identifying defective, damaged and obselete items.

* The auditor should ensure that management adopt a physical verification system in which inventories are verified atleast once in a financial year.

* The auditor should be ensured that if any discrepancies or shortcomings are detected while performing the audit, the management takes timely actions to prevent it's further occurence.

* Test counts should be placed on high value items.

* Auditor should ensure that goods in transit are properly recorded in the books.

* If inventories are held by third parties, auditor should obtain confirmation from third parties acknowledging such holding of inventory.

Therefore the above statement in the question includes some major responsibilities of the auditor in inventory audit, but that doesn't mean that auditor has discharge all his responsibilities it has other responsibilities too as mentioned in the solution above.

ekkarill92 answered 1 year ago

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