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 prices to supplier invoices, the auditor can detect if the client valued their inventory based on the most recent invoice only, which could result in an incorrect valuation. This verifies that the inventory values are based on actual prices paid to suppliers and not subjective estimates or outdated prices. Extension errors, incorrect accounting methods, and wrong inventory count quantities are other types of errors that would require different testing methods.

As Part of the Audit of Valuation, the Auditor Is