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) Increase the extent of tests of controls for the inventory cycle.
B) Request that the client schedule the physical inventory count at the end of the year.
C) Insist that the client 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, the auditor would likely be more skeptical of the perpetual inventory records maintained by the client. By requesting that the client schedule the physical inventory count at the end of the year, the auditor can obtain more reliable evidence about the existence and valuation of inventory. This can help to reduce the risk of material misstatement in the financial statements. Option A is not the best choice, since tests of controls are less useful when control risk is high. Option C would be expensive and impractical for the client to perform multiple physical counts. Option D is not the best choice, since gross profit tests are not specifically related to inventory quantities or valuation.

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