An entity maintains perpetual inventory records in both quantities and dollars.If the assessed level of control risk is high,an auditor would probably
A) increase the extent of tests of controls for the inventory cycle.
B) request that the entity schedule the physical inventory count at the end of the year.
C) insist that the entity perform physical counts of inventory items several times during the year.
D) apply gross profit tests to ascertain the reasonableness of the physical counts.

Question

Quizplus · Accepted Answer

If the assessed level of control risk is high, it indicates that there is a higher possibility of material misstatements in the inventory cycle. Therefore, the auditor might request that the entity schedules a physical inventory count at the end of the year. It will help the auditor to physically verify the quantities and condition of inventory items, thereby reducing the risk of material misstatements. However, increasing the extent of tests of controls, performing multiple physical counts, or applying gross profit tests might not be sufficient to address the high control risk.

An Entity Maintains Perpetual Inventory Records in Both Quantities and Dollars.If