k$.$ McPherson Corp. does not make an annual physical count of year$-$end inventories, but

instead makes weekly test counts on the basis of a statistical plan. During the year,

Sara Mullins, CPA, observes such counts as she deems necessary and is able to satisfy

herself as to the reliability of the client's procedures. In reporting on the results of her

examination, Mullins:

$(1)$ Can issue an unqualified opinion without disclosing that she did not observe year$-$

end inventorics.

$(2)$ Should comment in the scope paragraph as to her inability to observe year$-$end

inventories, but can nevertheless issue an unqualificd opinion.

$(3)$ Is required, if the inventories are material, to disclaim an opinion on the financial

statements taken as a wholc.

$(4)$ Should, if the inventories are material, qualify her opinion.

L$.$ The primary objective of a CPA's observation of a client's physical inventory count is

to:

$(1)$ Discover whether a client has counted a particular inventory item or group of

items.

$(2)$ Obtain direct knowledge that the inventory exists and has been properly counted.

$(3)$ Provide an appraisal of the quality of the merchandise on hand on the day of the

physical count.

$(4)$ Allow the auditor to supervise the conduct of the count in order to obtain

assurance that inventory quantities are reasonably accurate.