An Auditor for a Major Retail Company Suspects That Inventory

question 226

Multiple Choice

An auditor for a major retail company suspects that inventory fraud is occurring at three stores which have high costs of goods sold. Which of the following audit activities would provide the most persuasive evidence that fraud is occurring?

• A) Use an integrated test facility (ITF) to compare individual sales transactions with test transactions submitted through the ITF and investigate all differences.
• B) Interview the three individual store managers to determine if their explanations about the observed differences are the same, and then compare their explanations to that of the section manager.
• C) Schedule a surprise inventory audit to include a physical inventory and investigate areas of inventory shrinkage.
• D) Select a sample of individual store prices and compare them with the sales entered on the cash register for the same items.