The auditor has identified that, due to the way in which inventory is stored in the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The auditor has identified that, due to the way in which inventory is stored in the warehouse, the inherent risk of accuracy valuation and allocation of inventory is high. There are no controls to rely on, so the auditor assesses control risk to be high. John, an audit colleague, has been asked to take a sample of 120 inventory items to test for accuracy, valuation and allocation. He selects the sample using systematic selection. Required Briefly explain to John why his approach to selecting the sample is incorrect. The auditor has identified that, due to the way in which inventory is stored in the warehouse, the inherent risk of accuracy valuation and allocation of inventory is high. There are no controls to rely on, so the auditor assesses control risk to be high. John, an audit colleague, has been asked to take a sample of 120 inventory items to test for accuracy, valuation and allocation. He selects the sample using systematic selection. Required Briefly explain to John why his approach to selecting the sample is incorrect.
Expert Answer:
Answer rating: 100% (QA)
Johns approach to selecting the sample using systematic selection is ... View the full answer
Related Book For
Auditing and Assurance services an integrated approach
ISBN: 978-0133125689
15th edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
Posted Date:
Students also viewed these accounting questions
-
The auditor has identified each of the following control procedures as important in reducing control risk in major accounting applications. Required For each control procedure identified, indicate...
-
You have a product in which inventory is taken frequently, rather than once or twice per year. Under what cases your inventory of this product could be computerized?
-
Explain why inherent risk is set for audit objects for segments (classes of transaction, balances, and presentation and disclosure) rather than for the overall audit. What is the effect on the amount...
-
Smile is a social media site that is growing in popularity. The firm has been around for a few years and has created a nice market niche for itself. Now the company has a possible buyer who has made...
-
If you add up all the current accounts of all countries in the world, the sum should be zero. Yet this is not so. Why?
-
7. The following information is from the noncurrent liabilities and owners' equity portions of Colony LLC's balance sheet: December 31 2020 2019 Bonds payable $ 410,000 $330,000 Common stock 800,000...
-
The table lists the number of motor vehicle thefts (in millions) and burglaries (in millions) in the United States for the years 2005 through 2015. Construct a time series chart for the number of...
-
Sue is a customer account representative for ABC Company. She recently acquired several new accounts when a previous representative, Dan, took an early retirement. Sue reviewed each of Dans accounts...
-
Evaluate the challenges and strategies associated with implementing quality control in complex, global supply chains, considering the impact of multi-tier suppliers, geographical dispersion, and...
-
You own a flooring company that sells the following items. Product Premium Carpet Basic Carpet Luxury Vinyl Flooring Standard Vinyl Flooring Delivery Fee Installation Price $4.00 / square ft....
-
Income Statement Completing this activity will help you learn to: Determine total revenues, expenses, and net income for a period and compare results over time. Extract information from a data set...
-
Ottride Corp. preferred stock pays a fixed dividend of $21.64 per share every year investors require a 13.65% rate of return on stocks with similar risk characteristics, what is the intrinsic value...
-
al A 12-in. square concrete pile is driven into loose sand to a depth of 30 feet. Unit weight is 118 pcf, internal friction is 30 degrees. Find the pile's axial capacity if K is assumed to be 0.7 and...
-
1) Below is a list of 32-bit memory address references, given as word addresses. 2, 3, 11, 16, 21, 13, 64, 48, 19, 11, 3, 22, 4, 27, 6, and 11 show the hits and misses and final cache contents for a...
-
1. Otis Campbell and his wife, Shirley, decided to get a divorce after 28 years of marriage. They reside in Katy, Texas. They cannot agree on the property settlement, so they want a judge to decide...
-
A financial institution starts the first day of operations with $10 million in capital. It has $150 million in checkable deposits. It makes $35 million commercial loan and 55 million in mortgages...
-
As a portfolio manager with $100M in assets tied to the S&P500, you decide to use a buy write strategy, with the S&P500 index trading today at 4000. You write calls selling for $70 per share with a...
-
Suppose Green Network Energy needs to raise money to finance its new manufacturing facility, but their CFO does not think the company is financially capable of making the periodic interest payments...
-
Identify three tests of controls or substantive tests of transactions in the payroll and personnel cycle that an auditor may perform using audit software.
-
Your client, Red Horse, Inc., prepared the following schedule for long term debt for the audit of financial statements for the year ended December 31, 2013: Required a. What type of evidence would...
-
Tim Flynn is the engagement manager for the audit of ODonnell Enterprises. Tim is currently planning tests of details of balances for accounts receivable and is considering the use of electronic...
-
Victoria has prepared the following list of statements about corporations. 1. A corporation is an entity separate and distinct from its owners. 2. As a legal entity, a corporation has most of the...
-
Indicate whether the following items would appear on the income statement (IS), statement of financial position (SFP), or retained earnings statement (RES). a. Dividends. b. Cash. c. Salaries and...
-
On May 10, Chen Co. issues 2,000 6 par value ordinary shares for cash at 13 per share. Journalize the issuance of the shares.
Study smarter with the SolutionInn App