The audit strategy that would be the most appropriate when an auditor has assessed a predominantly substantive approach is to determine inventory quantity is by
A) physical count at or within a few days of balance date.
B) physical count near balance date, adjusted by reference to perpetual records.
C) reference to perpetual records, without a physical count at or near balance date.
D) none of the above

Question

Quizplus · Accepted Answer

When the auditor has assessed a predominantly substantive approach, meaning that there is a high risk of material misstatement in the inventory balance, the most appropriate audit strategy is to perform a physical count of inventory at or within a few days of the balance date. This is because physical counting provides the most reliable evidence for verifying inventory quantity, and it helps to reduce the risk of inventory being miscounted or stolen between the count date and the balance date. Therefore, option A is the best choice in this situation. Option B may also be appropriate, but it carries a higher risk of misstatement since it relies on the accuracy of perpetual records. Option C is not a reliable strategy for verifying inventory quantity and is therefore not appropriate.

The Audit Strategy That Would Be the Most Appropriate When