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CA Intermediate · Auditing and Ethics · Audit Evidence

While auditing Kaveri Textiles Ltd, the auditor wants to confirm that the company's yarn stock sheets include all items physically lying in the godown. The auditor selects a few items from the godown floor and traces them to the stock sheets. Which assertion is primarily tested by this direction of testing?

The assertion tested is completeness. Picking items from the godown floor and tracing them to the stock sheets checks that all physical stock has been recorded. Testing in the opposite direction, from the sheets to the floor, would address existence instead.

  1. ACompletenessCorrect
  2. BExistence
  3. CValuation and allocation
  4. DCut-off

Explanation

Selecting items from the physical stock and tracing them to the records tests whether everything that exists has been recorded, which is completeness. Tracing from records to the floor would test existence, which is the usual distractor here. Valuation and cut-off are not the focus of this direction of test.

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