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An auditor was satisfied that the carrying value of factory equipment was fairly stated as of the beginning of the period. Du

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Answer #1

The correct answer is OPTION D i.e Select items from the accounting records and observe them in the entity's factory.

Explanation

Auditor requires various conducts to do a satisfied audit. He conducts various checks, carries out physical verification of assets and also select items from the accounting records and observe them in the entity's factory.


While conducting audit in case of equipments of an entity, the auditor have to physically verify the factory equipments even though the accounting records of such equipments is correct.

So, in the case when an auditor was satisfied that the carrying value of factory equipments was fairly as of the beginning of the period. During the period, the entity had several transactions involving the purchase and disposal of equipment.

The most effective in providing evidence that all equipments are reported in this financial statements actually exist is to select items from the accounting records and observe them in the entity's factory.

Physical education is must required in such audits, so the auditor cannot just select items from accounting records and trace them to purchase documents or evaluate the entities policies for capitalizing and expensing costs related to the acquisition of equipments.
Also the auditor cannot just select the item on the factory floor and trace them to the accounting records.

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