In an audit of inventory, observing the client’s stock count mainly helps the auditor evaluate whether:
Correct answer: B. The count is conducted according to stated procedures
- A. All purchases were paid before year-end
- B. The count is conducted according to stated procedures
- C. Every supplier balance is correctly confirmed
- D. The entity has recorded every sales invoice
Explanation
Attending a physical inventory count allows the auditor to observe the counting process and assess compliance with management’s instructions. It may also provide evidence about inventory existence, but it does not directly confirm supplier balances or sales completeness.
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About Auditing
Auditing examines accounting records and financial statements to determine whether they present a reliable and fairly stated position. The subject covers audit objectives, internal controls, audit evidence, materiality, vouching, verification, working papers, auditor independence, audit reports, and the distinction between an audit and accounting or investigation.
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