Question

Jennifer Jones has been assigned to audit inventory for Consumer Home Electronics Warehouse. Consumer Home Electronics Warehouse is a retailer of a variety of home electronics and appliances (ranging from refrigerator and stoves, washers and dryers, televisions, computers, and cell phones). Consumer Home Electronics Warehouse has 25 locations located in larger cities in the midwestern United States.

Jennifer plans to audit the existence of inventory. Put the following steps associated with planning and executing a sample of inventory in the proper order.

a.		Choose the number of items to be examined.
b.		Document conclusions.
c.		Select a representative sample.
d.		Determine the objectives of the substantive test.
e.		Determine the type of sampling to be used.
f.		Determine the substantive procedures that will meet objectives.
g.		Determine sample size.
h.		Apply audit procedures.
i.		Define the population and sampling unit.
j.		Evaluate results of the sample.

Answer 1

A. Determine the objectives of the substantive test.

B. Determine substantive test that will meet the objectives.

C. Define the population and sampling unit.

D. Determine type of sampling to be used.

E. Determine sample size.

F. Choose the number of items to be examined.

G. Select a representative sample.

H. Apply audit procedures.

I. Evaluate the results of sample.

J. Document conclusions.

Substantive procedures are performed in an audit to check if there are any material misstatement, taking into consideration each assertion - existence, valuation, rights and obligation, completeness, etc.

So the first step is to determine the objectives of the substantive test or to see which assertion is to be tested-existence in this case. The next step is to look for a substantive test that will be able to check test the assertion.

The next step would be to determine the population and sampling unit from which the samples would be tested. Here it would be the inventory balances for a particular period for which existence is to be tested. After which the type of sampling to be used has to be determined.

The number of samples to be examined has to be decided next which will determine the sample size.

A representative sample from the sampling unit has taken for testing and audit procedures to check existence has to be applied. The results of the test has to evaluated and conclusions are to be documented at the end.