The following questions deal with tests of details of balances and substantive analytical procedures for inventory. Choose the best response.
a. An auditor selected items for test counts while observing a client’s physical inventory.
The auditor traced the test counts to the client’s inventory listing. This procedure
likely obtained evidence about which balance-related audit objective for inventory?
(1) Existence
(2) Rights and obligations
(3) Completeness
(4) Realizable value
b. If the perpetual records show lower quantities of inventory than the physical count,
an explanation of the difference might be unrecorded
(1) sales.
(2) sales discounts.
(3) purchases.
(4) purchase discounts.
c. An inventory turnover analysis is useful to the auditor because it may detect
(1) inadequacies in inventory pricing.
(2) methods of avoiding cyclical holding costs.
(3) the existence of obsolete merchandise.
(4) the optimum automatic reorder points.
