What would you do if you test-counted 150 items and found a substantial num- ber of counting errors?

Latner Shoe Distributor Company maintains a large portion of the shoe merchandise in 10 warehouses throughout the eastern United States. This ensures swift delivery service for its chain of stores. You are assigned alone to the Boston warehouse to observe the physical inventory process. You encountered the following situations during the December 31, 2019, physical inventory:
Required
Required
Chapter 21 / AUDIT OF THE INVENTORY AND WAREHOUSING CYCLE 725
a. (1) In one storeroom of 10,000 items, you have test-counted about 200 items of high
value and a few items of low value. You found no misstatements. You also note
that the employees are diligently following the inventory instructions. Do you
think you have tested enough items? Explain.
(2) What would you do if you test-counted 150 items and found a substantial num-
ber of counting errors?
b. In observing an inventory of liquid shoe polish, you note that one lot is 5 years old.
From inspection of some bottles in an open box, you find that the liquid has solidi-
fied in most of the bottles. What action should you take?
c. During your observation of the inventory count in the main warehouse, you found
that most of the prenumbered tags that had been incorrectly filled out are being de-
stroyed and thrown away. What is the significance of this procedure and what action
should you take?
d. During the inventory count, several express trucks pulled in for loading. Although
infrequent, express shipments must be attended to immediately. As a result, the em-
ployees who were counting the inventory stopped to assist in loading the express
trucks. What should you do?

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