Substantive Testing of Inventory Variances
An auditor observed Bizarre Costume Shop’s physical inventory count on the last day of the client’s fiscal year, October 31, 2020. In addition to being somewhat disturbed by the costumes, the auditors identified several variances in the test counts relative to the client’s recorded inventory. Through inquiry, YBBD obtained explanations from the client’s management.
Required:
For each variance listed and client response, select the audit response the auditor would most likely make from the list of possible responses. Each response may be used once, more than once, or not at all. Write only the letter of the response in the space provided.
Possible audit responses:
a.
Inspect supporting documents and agree quantities received to purchase order.
b.
Inspect supporting purchase documents for proper shipping terms and receiving information to verify exclusion from inventory count.
c.
Inspect supporting purchase documents for proper shipping terms and receiving information to verify inclusion in inventory count.
d.
Inspect supporting sale and shipment documentation for proper shipping terms for exclusion in inventory count.
e.
Inspect supporting sale and shipment documentation for proper shipping terms for inclusion in inventory count.
f.
Request that client make appropriate correction to record additional inventory.
g.
Request that client make appropriate correction to reduce inventory.
Test
Count
number Inventory Item Quantity
SpiderHorse
1
2
3
4
5
Unibrow Man
Werewolf
Wonder Woman
Hairy Potter
Recorded Audit
