You Are Conducting the Audit of Files R Us Inc

question 21

Essay

You are conducting the audit of Files R Us Inc. (FRI), a family-owned business that manufactures a variety of different wooden and metal file cabinets. In business for over twenty years, FRI has a reputation for providing high-quality products on time or even ahead of schedule. FRI does not sell to the public, but only to fine furniture stores and to a variety of office supply chains.
As of the current year-end, the company has a total of $6.3 million in assets. Inventory information is as follows:

File cabinet production is intensely competitive, primarily due to imports from Asia and Mexico. To help manage costs, FRI uses a job-order, standard cost system. Standard costs are assessed quarterly. Each job is costed and compared to standard. Inventory is counted only at the end of the year. There is no perpetual inventory system.
Due to problems with raw material quality and new staff, losses have been incurred in the last six months of the year. Your review of last year's audit file indicated that there were numerous inventory adjustments required last year.
Required:
Using the audit risk model, assess the risks associated with the audit of inventory.

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Definitions:

Social Policies

Systematic guidelines, principles, legislation, or activities that affect the welfare of the human population, influencing various societal issues like health, education, and employment.

Racial Outgroup

A group of individuals who are perceived as different or separate from one's own group due to racial or ethnic distinctions.

Right-Wing Authoritarianism

A personality and ideological framework characterized by submission to authority, aggressiveness towards out-groups, and a rigid adherence to societal norms.

Social Dominance Orientation

A personality trait which predicts social and political attitudes, emphasizing a preference for hierarchy in the social structure and domination over lower-status groups.