The most reliable procedure for an auditor to use to test the existence of a client's inventory at an outside location would be to:
A)Observe physical counts of the inventory items.
B)Trace the total on the inventory listing to the general ledger inventory account.
C)Obtain a confirmation from the client indicating inventory ownership.
D)Analytically compare the current-year inventory balance to the prior-year balance.

Question

Quizplus · Accepted Answer

Observing physical counts of the inventory items is the most reliable procedure for an auditor to test the existence of a client's inventory at an outside location. This procedure provides direct and objective evidence of the physical existence of the inventory. Tracing the total on the inventory listing to the general ledger only verifies that the inventory total has been recorded in the general ledger. Obtaining a confirmation from the client indicates ownership, not necessarily existence. Analytically comparing current and prior year balances can identify potential issues but does not provide direct evidence of existence.

The Most Reliable Procedure for an Auditor to Use to Test