When considering clients like Boeing, inventory will most likely be the largest current asset and prepaid expenses will be one of the smallest.As a result, the auditors should plan to _______.
A)devote more audit time to the inventory account than the prepaid expenses account
B)devote more audit time to prepaid expenses to the inventory account
C)use more complex audit tests for inventory and more simple audit tests for prepaid expenses
D)observe more material misstatements in prepaid expenses due to timing differences as compared to the inventory account

Question

Quizplus · Accepted Answer

Since inventory is the largest current asset, it poses a higher risk of material misstatement and fraud. Therefore, auditors should focus more on inventory during their audit procedures and devote more audit time to ensure that it is properly valued and accounted for. Prepaid expenses, on the other hand, are relatively small and less prone to material misstatements, so auditors can allocate less time for this account.

When Considering Clients Like Boeing, Inventory Will Most Likely Be