When auditing Steel Ltd, a large manufacturer of building supplies, which one of the following audit procedures would give the least assurance with regards to the valuation and allocation assertion for inventory?
A)Examining paid vendors' invoices.
B)Testing the computation of standard overhead rates.
C)Obtaining confirmation of inventories pledged under loan agreements.
D)Reviewing direct labour rates.

Question

Quizplus · Accepted Answer

Obtaining confirmation of inventories pledged under loan agreements provides the least assurance regarding the valuation and allocation assertion for inventory because it primarily relates to the disclosure and existence of inventory rather than directly addressing its valuation and allocation.

When Auditing Steel Ltd, a Large Manufacturer of Building Supplies