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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

During the audit of Zephyr Ltd, an auditor wants evidence that inventory recorded in the financial statements actually exists at the year-end. Which procedure is most directly relevant to the existence assertion for inventory?

Selecting items from the inventory listing and physically inspecting them best addresses existence, because it starts with recorded amounts and confirms that the goods are really there. Tracing from the count sheets to the listing tests completeness instead, since it works in the opposite direction.

  1. ATracing a sample of items counted on the count sheets to the final inventory listing
  2. BSelecting items from the inventory listing and physically inspecting them at the warehouseCorrect
  3. CReviewing post year-end sales prices to assess net realisable value
  4. DReperforming the extension of quantity multiplied by unit cost on the listing

Explanation

Existence tests move from the recorded amounts to the physical item. Selecting from the listing and inspecting the goods confirms they exist. Tracing from count sheets to the listing tests completeness, because it starts from the physical items and checks they were recorded.

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