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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Evidence and testing considerations

Zephyr Ltd, an audit client, holds inventory in several warehouses. Auditor Mara Chen is planning to attend the year-end inventory count. Under ISA 501, which of the following is the auditor's primary objective when attending the count?

The auditor attends the count to evaluate management's count instructions and procedures, observe them being applied, inspect the inventory and perform test counts. This provides evidence of existence and condition. The count remains management's responsibility, and valuation is tested separately.

  1. ATo take over responsibility for the count from management and record the final quantities
  2. BTo evaluate management's instructions and procedures for recording and controlling the count, and to observe their performance and perform test countsCorrect
  3. CTo confirm that inventory is valued at the lower of cost and net realisable value
  4. DTo prove that no inventory exists at locations the auditor did not visit

Explanation

ISA 501 requires the auditor to attend the count where inventory is material, evaluate management's instructions, observe procedures, inspect inventory and perform test counts. This gives evidence on existence and condition. Valuation is not the main purpose of attendance, and the count remains management's responsibility.

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