While planning the audit of Wholesale Ltd. (WL), a publicly traded merchandising company, Gale Simms, WL's auditor, is reviewing the following asset and liability accounts and their year-end balances:

                                      2020                                 2019

Cash                          $ 154,910                $ 145,080

Inventory                       325,750              276,450

Accounts payable        275,790               292,050

Bonds payable             1,240,000           1,200,000


Required:

a) Identify the asset account that is most likely to be overstated at year end. Explainwhy it is most likely to be overstated and why the other asset account is less likely tobe overstated.

b) Provide one audit procedure that might detect an overstatement of the accountidentified in part (a).


c) Identify the liability account that is most likely to be understated at year end. Explainwhy it is most likely to be understated and why the other liability is less likely to beunderstated.


d) Provide one audit procedure that might detect an understatement of the accountidentified in part (c).

Answer rating: 100% (QA)

a The inventory account is most likely to be overstated at yearend This is because inventory is valu... View the full answer