Question

Reply as to whether each of the following comments relating to inventory during a financial statement audit is correct or incorrect.

Correct/Incorrect Statement Inventory items "consigned in" should be included in the client's inventory totals. With strong internal control an inventory count may be performed prior to year-end. Generally accepted auditing standards require that the auditor be present at each location the client maintains inventory. Auditors must count all inventory items during the inventory count. The inventory of a manufacturing client will include direct labor, direct materials, and overhead components Inventory is ordinarily valued at the lower of cost or market. Ordinarily, the auditors will leave a copy of all their counts with the client so the client can correct misstatements. Every auditor test count must be documented. Auditors' observation of a client's counting of inventories ordinarily addresses the existence of inventory more than its completeness. 10. The client need not count every item. 5.

Answer 1

Answer -

Statement showing - Whether each of the following comments relating to inventory during a financial statement audit is Correct or Incorrect -

	Statement	Correct / Incorrect	Reason
1.	Inventory items "consigned in" should be included in the client's inventory totals.	Incorrect	Because, inventory items "consigned in" does not belong to the client
2.	With strong internal control an inventory count may be performed prior to year-end.	Correct	-
3.	Generally accepted auditing standards require that the auditor be present at each location the client maintains inventory.	Incorrect	Because, generally accepted auditing standards does not require that the auditor to be present at each location the client maintains inventory.
4.	Auditors must count all inventory items during the inventory count.	Incorrect	Because, counting all inventory items is not required.
5.	The inventory of a manufacturing client will include direct labor, direct materials, and overhead components.	Correct	-
6.	Inventory is ordinarily valued at the lower of cost or market.	Correct	-
7.	Ordinarily, the auditors will leave a copy of all their counts with the client so the client can correct misstatements.	Incorrect	-
8.	Every auditor test count must be documented.	Incorrect	Because, only enough test count must be recorded, so that a reviewer can determine whether a proper test count has been taken. Hence, every auditor test count need not to be recorded.
9.	Auditors' observation of a client's counting of inventories ordinarily addresses the existence of inventory more than its completeness.	Incorrect	Because, both the, existence and completeness are addressed.
10.	The client need not count every item.	Correct	-