As part of the audit of valuation,the auditor is conducting pricing tests by comparing to supplier invoices.The auditor is making sure that,for each item tested,sufficient supplier invoices are examined to cover the quantity of inventory that was on hand during the physical inventory count.What type of pricing error could this detect?
A)The client valued their inventory on the basis of the most recent invoice only.
B)The client has used the incorrect accounting method to value its inventory.
C)Extension errors could occur with numerous different inventory items.
D)The wrong inventory count quantity could have been recorded on the count sheets.

Question

Quizplus · Accepted Answer

By comparing the inventory valuation to supplier invoices, the auditor can detect whether the client valued their inventory solely based on the most recent invoice or not. This could result in pricing errors if the most recent invoice does not reflect the current market value of the inventory. Therefore, this test helps the auditor identify any potential misstatements in inventory pricing. Option B relates to the accounting method used by the client, and option C and D are not related to pricing errors.

As Part of the Audit of Valuation,the Auditor Is Conducting