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Your Audit Client, Wigley, Is a Retail Department Store That

question 18

Essay

Your audit client, Wigley, is a retail department store that does not produce any products. You are currently working on the inventory portion of the audit. In obtaining audit evidence in support of financial statement assertions, the auditor develops specific audit objectives in response to those assertions. Audit procedures are then selected to accomplish audit objectives.
For each specific inventory audit objective listed (Audit Objectives tab) select the most closely related account balance financial statement assertion and the most appropriate audit procedure. Financial statement assertions and audit procedures may be selected once, more than once, or not at all. $Your audit client, Wigley, is a retail department store that does not produce any products. You are currently working on the inventory portion of the audit. In obtaining audit evidence in support of financial statement assertions, the auditor develops specific audit objectives in response to those assertions. Audit procedures are then selected to accomplish audit objectives. For each specific inventory audit objective listed (Audit Objectives tab) select the most closely related account balance financial statement assertion and the most appropriate audit procedure. Financial statement assertions and audit procedures may be selected once, more than once, or not at all. \begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|l|} \hline &\text { Specific audit objectives } & \text { (A) } & \text { (B) } & \text { (C) } & \text { (D) } & \text { (E) } & \text { (F) } & \text { (G) } & \text { (H) } & \text { (I) } & \text { (J) } & (\mathrm{K}) \\ \hline 1.&\text { The entity has legal title to inventories. } & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\ \hline 2. &\text { Recorded inuentory quantities include all products on hand. } & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\ \hline 3. &\text{Inventories are reduced, when appropriate, to replacement}\\ &\text{ costs or net realizable value.}& 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\ \hline 4. &\text{Cost of imentories is properly calculated.}& 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\ \hline 5. &\text{The major categories of inventories and their basis of}\\ &\text{valuation are adequately reported in the financial statements.}& 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\ \hline \end{array}$ $\begin{array}{|l|l|l|l|l|l|l|l|l|l|l|l|l|}\hline &\text { Specific audit objectives } & \text { (A) } & \text { (B) } & \text { (C) } & \text { (D) } & \text { (E) } & \text { (F) } & \text { (G) } & \text { (H) } & \text { (I) } & \text { (J) } & (\mathrm{K}) \\\hline 1.&\text { The entity has legal title to inventories. } & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\\hline 2. &\text { Recorded inuentory quantities include all products on hand. } & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\\hline 3. &\text{Inventories are reduced, when appropriate, to replacement}\\&\text{ costs or net realizable value.}& 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\\hline 4. &\text{Cost of imentories is properly calculated.}& 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\\hline 5. &\text{The major categories of inventories and their basis of}\\&\text{valuation are adequately reported in the financial statements.}& 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0&0 \\\hline\end{array}$

Definitions:

Chapter 7

A provision of the U.S. Bankruptcy Code that involves the liquidation of a debtor's assets to pay off creditors.

Debtor's Estate

All legal rights, interests, and properties owned by a debtor at the time of bankruptcy filing.

Creditor

A person or entity that lends money or extends credit to another party.

Declare Bankruptcy

The formal process by which an individual or business legally declares their inability to pay outstanding debts.