A risk to the auditor due to the complexity of physical inventory includes the possibility of which of the following?
A)Overstatement of individual items across multiple locations for cutoff testing.
B)Utility of the items exceeding their cost for existence testing.
C)Movement of goods during existence testing.
D)Stocking of only one type of inventory in the warehouse for presentation and disclosure testing.

Question

Quizplus · Accepted Answer

The complexity of physical inventory increases the risk of movement of goods during existence testing. This means that the auditor may find it difficult to identify whether the inventory being counted actually exists or has been moved or removed from the warehouse. This risk can be mitigated through careful planning and observation during the inventory count process. Choices A, B, and D are incorrect as they are not related to the risk of complexity in physical inventory.

A Risk to the Auditor Due to the Complexity of Physical