The Auditor Has Determined That the Inventory Procedures Are Highly

question 29

Multiple Choice

The auditor has determined that the inventory procedures are highly automated with limited use of a paper or physical trail.Rather than having people count inventory (since all inventory has RFID tags attached) ,inventory is being read using the wireless mesh network.To provide assurance with respect to ending inventory,the auditor should

• A)bring in additional audit staff and conduct a high level of test counts,matching these counts to the automated systems.
• B)use dollar-unit sampling to identify all high-dollar inventory items and ask the client to physically count these items using count teams.
• C)test the quality of the controls over the programs in use and over tagging inventory items.
• D)request that the client implement manual rotating counts to test the quality of the automated systems.

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Definitions:

Owner's Equity

The residual interest in the assets of an entity after deducting liabilities, representing the ownership interest of shareholders or proprietors.

Balance Sheet

A financial statement that shows a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Revenues

The total income generated from normal business operations and other activities over a period.

Assets

Resources owned by a business that are expected to provide future economic benefits.