identify material misstatements in the amounts presented.

Problem 14-31 Tests of account balances are intended to obtain audit
evidence about the fairness of the inventory accounts or, alternatively,
identify material misstatements in the amounts presented. Audit
procedures can only be selected after the auditor determines specific
audit objectives related to management assertions.
Management Assertions
1. Existence or occurrence
2. Completeness
3. Rights and obligations
4. Valuation or allocation
5. Presentation and disclosure
Required:
For each audit procedure below, identify the related management
assertion(s) that the audit procedure tests and explain the audit
objective of the procedure.
(a) Trace totals of inventory files to
the general ledger, including proper classification as raw materials,
WIP, or finished goods.
(b) Test additions to inventory by selecting a
sample of recorded purchases from the inventory records and examining
supporting documents.
(c) Review consignment contracts and scan inventory records for inclusion of amounts for any consigned items not owned.
(c)
Reperform calculations supporting decisions about write-downs or
write-offs of inventory and trace any adjustment amounts to the
inventory records.
(d) Using computer-assisted auditing techniques
reperform calculations testing mathematical accuracy, including totals
extensions of price and quantity and unit or batch aggregations;
recalculation is based on appropriate application of the client costing
method (FIFO, LIFO, weighted average, specific identification, etc.).

 

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