When a client uses perpetual inventory records, the tests of details of balances for inventory can be significantly reduced if the auditor believes the records are accurate. The controls over the acquisitions included in the records are normally tested as a part of the
A) tests of controls for acquisitions.
B) tests of controls and substantive tests of transactions for acquisitions.
C) tests of details of balances for acquisitions.
D) analytical procedures and tests of controls for acquisitions.

Question

Quizplus · Accepted Answer

The controls over the acquisitions included in perpetual inventory records are normally tested as a part of the tests of controls and substantive tests of transactions for acquisitions. These tests are necessary to ensure that the acquisitions are accurately recorded in the perpetual inventory records, which will then form the basis for the tests of details of balances for inventory. If the auditor believes that the records are accurate, then the tests of details of balances for inventory can be significantly reduced, but the tests of controls and substantive tests of transactions must still be performed to ensure the accuracy of the records. Option B covers both the tests of controls and substantive tests of transactions, which is the correct choice.

When a Client Uses Perpetual Inventory Records, the Tests of Details