Question: During his examination of the inventories and related accounts of

During his examination of the inventories and related accounts of Consumer Electronics Inc., a manufacturer and distributor of small appliances, an auditor encountered the following:
a. Several trucks loaded with finished goods were parked at the shipping dock. The contents of the trucks were excluded from the physical inventory.
b. The finished goods inventory included high volumes of several products, and many of their cartons were old and covered with dust. In response to the auditor’s questions, the plant manager stated that there was no problem as “all of these goods will eventually be sold although some price incentives may be necessary.”
c. While reviewing the complex calculations used to develop the unit production costs of items in finished goods, the auditor noted that the costs of the company’s electrical engineering department had been treated as period expenses in previous years but were included in manufacturing overhead in the current year.
d. The company installed a new perpetual inventory system during the year. The auditor noted that numerous of the company’s recorded year-end quantities differed from the actual physical inventory counts. Partly because of these problems, the company took a complete physical inventory at year-end.

Describe the additional audit procedures (if any) that the auditor should perform to obtain sufficient appropriate evidence in each of the preceding situations.

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  • CreatedJanuary 09, 2015
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