Question

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question. 1) D) Your audit client, Banner, is a retail sporting goods store. You are currently working on the inventory portion of the audit. In obtaining audit evidence in support of financial statement assertions, the auditor develops specific audit objectives in response to those assertions. Audit procedures are then selected to accomplish audit objectives. For each specific inventory audit objective listed, select the most closely related account balance financial statement assertion and the most appropriate audit procedure. Financial statement assertions and audit procedures may be selected once, more than once, or not at all. Audit procedure Financial statement assertion A. Completeness B. Existence C. Rights and Obligations D. Valuation and Allocation F. Examine current vendors' price lists. G. Review drafts of the financial statements. H. Select a sample of items during the physical inventory count and determine that they have been included on count sheets. Select a sample of recorded items and examine supporting vendors' invoices and contracts. J. Select a sample of recorded items on count sheets during the physical inventory count and determine that items are on hand. K. Test reasonableness of direct labor rates. E. Presentation and disclosure Specific audit objectives 1 The entity has legal title to inventories. 2 Recorded inventory quantities include all products on hand. 3 Inventories are reduced, when appropriate, to replacement costs or net reali: value. 4 Cost of inventories is properly calculated. 5 The major categories of inventories and their basis of valuation are adequate reported in the financial statements.

Answer 1

Sl No	Specific Audit Objectives	Financial Statement Assertion	Audit Procedure
1	The entity has legal title to inventories	(C ) Rights and Obligations	(I) Select a sample of recorded items and examine supporting vendors invoices and contracts
2	Recorded inventory quantities include all products on hand	(A) Completeness	(H) Select a sample of recorded items during physical inventory count and determine that they have been included in count sheets
3	Inventories are reduced, when appropriate, to replacement costs or net realizable value	(D) Valuation and allocation	(F) Examine current vendor's price list
4	Cost of Inventories is properly calculated	(D) Valuation and allocation	(I) Select a sample of recorded items and examine supporting vendors invoices and contracts
5	The major categories of inventories and their basis of valuation are adequately reported in financial statements	(E ) Presentation and disclosure	(G) Review drafts of the financial statements