Amy Adams, the audit senior, is reviewing the working papers written by the audit assistant on the audit of Virginia Creepers, a garden nursery and retailer of garden accessories. Amy reads the following description of the results of testing of inventory controls written by the audit assistant:

Stock controller advises that no changes have been made to the inventory programs during the current financial year. There are no documents on file authorising program changes so I conclude the stock controller’s statement is true.

Stock controller also advises that management did not attempt to override any controls relating to inventory. There are no memoranda or emails from management on file instructing the stock controller to go against procedures, so I conclude the stock controller’s statement is true.

The audit assistant concludes that the inventory controls have not been changed or overridden during the financial year, so the results of the interim testing of controls can be relied upon.

Required

(a) Examine the statements by the audit assistant. What deficiencies in the testing can you identify?

(b) If the results of testing one control show that the control is not effective, does the auditor have to increase substantive testing? What other options are available to the auditor?

(c) Explain why it is important for the working papers to be completed with sufficient detail for another auditor to understand what has been done. Make a list of the parties who might review the documents.