An auditor is conducting an examination of the financial statements of a wholesale cosmetics distributor with an inventory consisting of thousands of individual items. The distributor keeps its inventory in its own distribution center and in two public warehouses. It maintains an inventory computer file on a computer disk, and at the end of each business day it updates the file. Each record of the inventory file contains the following data:

The auditor will use audit software to examine inventory data as of the date of the distributor’s physical inventory count. The auditor will perform the following audit procedures:
1 Observe the distributor’s physical count of inventories as of a given date, and test a sample for accuracy.
2 Compare the auditor’s test counts with the inventory records.
3 Compare physical count data with the inventory records.
4 Test the mathematical accuracy of the distributor’s final inventory valuation.
5 Test inventory pricing by obtaining item costs from buyers, vendors, or other sources.

6 Examine inventory purchase and sale transactions on or near the year-end date to verify that all such transactions were recorded in the proper accounting period.
7 Ascertain the propriety of inventory items located in public warehouses.
8 Analyze inventory for evidence of possible obsolescence.
9 Analyze inventory for evidence of possible overstocking or slow-moving items.

10 Test the accuracy of individual data items listed in the distributor’s inventory master file.
Required Describe how the use of the audit software package and a copy of the inventory file data might be helpful to the auditor in performing each of these auditing procedures.

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Item number Description of item Quantity-on-hand Location of item Cost per item Date of last purchase Date of last sale Quantity sold during year