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

Question

Quizplus · Accepted Answer

If the assessed level of control risk is high, an auditor would ask the client to schedule the physical inventory count at the end of the year and with a large number of test counts. This is because physical counts provide direct evidence for the existence and completeness assertions, which means that the auditor wants to be as sure as possible that the counts are accurate. Additionally, increasing the extent of tests of controls or applying gross profit tests may not be effective if the control risk is high, as there is a higher likelihood of material misstatements in the inventory. Therefore, choosing D is the best option.

A Client Maintains Perpetual Inventory Records in Both Quantities and Dollars.If