The following is a copy of the auditor?s working paper for auditing additions and disposals relevant to the balance of property, plant, and equipment (PPE) for the client New Millennium Ecoproducts.An auditor is conducting an audit 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 two public warehouses. An inventory database is maintained and updated after each transaction. The database contains the following information:

1. Item number.

2. Location of item.

3. Description of item.

4. Quantity on hand.

5. Cost per item.

6. Date of last purchase.

7. Date of last sale.

8. Quantity sold during year.

The auditor is planning to observe the distributor?s physical count of inventories as of an interim date. The auditor will have access to the inventory as of the date of the physical count and will use a general- purpose audit software package.

Required

The auditor is planning to perform inventory substantive tests. Identify the inventory tests and describe how the use of audit software and the database might be helpful to the auditor in performing such tests. Organize your answer as follows:

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How Audit Software and Data Analytics Might Be Helpful for Substantive Tests Inventory Substantive Test 1. Observe the physical count, making and recording test counts when applicable. 1. Determine which items are to be test-counted by selecting a random sample of a representative number of items from the inventory file as of the date of the physical count.