As the partner in charge of the yearly audit of BCS, you are reviewing the audit work papers for inventory. Before you sign off on the audit, you need to determine that sufficient audit work was done to determine that inventory is not materially misstated. Inventory is a material account, and if the balances for it and cost of goods sold are materially misstated, the financial statements will be materially misstated.
a. Describe the audit evidence the partner would expect to find in the work papers to determine whether inventory and cost of goods sold are materially misstated at year-end.
b. How will the partner know that the risk of material misstatement for the inventory process was adequately addressed during the audit?
c. What alternatives are available to the auditor if the audit evidence indicates that the account balance is materially misstated?