You Are Auditing Twinkles Ltd Which Runs a Chain of Jewellery

question 5

Essay

You are auditing Twinkles Ltd which runs a chain of jewellery shops and you are responsible for the audit of inventory. Counting and indentifying the items of jewellery is not a difficulty but verifying the value of the inventory is a major planning issue. How would you gather sufficient appropriate evidence to validate the value of inventories in this case?

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Definitions:

Accrued Expense

An expense that has been incurred but not yet paid, recognized on the financial statements.

Long-Lived Asset

An asset expected to provide economic benefits over a period longer than one year, such as buildings or machinery.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenue, expenses, and net income.

Net Income

The total profit or loss of a company after all revenues, costs, and expenses have been accounted for, often referred to as the bottom line.