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CMA Intermediate · Corporate Accounting and Auditing · Audit of Various Items of Financial Statements

During the audit of a manufacturing company, the auditor could not attend the physical stock count held on 31 March because of a prior assignment. Which procedure is most appropriate under the auditing standard on audit evidence for inventory?

The auditor should perform or observe some counts on an alternative date and test the stock movements between that date and the balance sheet date. Records or management certificates alone are not sufficient appropriate audit evidence, and a modified opinion comes into play only if such alternative evidence cannot be obtained.

  1. ARely entirely on the stock records maintained by the storekeeper
  2. BPerform or observe some physical counts on an alternative date and test the movements between that date and the balance sheet dateCorrect
  3. CAccept the management's inventory valuation certificate as sufficient evidence
  4. DIssue an adverse opinion without any further procedure

Explanation

When the auditor cannot attend the count, the auditor must perform or observe counts on another date and test transactions in the intervening period. Relying only on records or a management certificate is not sufficient appropriate evidence. An adverse opinion is not the immediate response; it is considered only if sufficient evidence cannot be obtained by alternative means.

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