When planning to attend the physical inventory count, the auditor considers:
a) Inherent risk, control risk, detection risk & materiality (inventory is significant)
b) Whether the client has adequate counting procedures and proper instructions
c) Timing of the count
d) Locations where inventory is held
e) Whether an expert is needed (nature/complexity/materiality of items)
Important exam phrase:
Audit procedures at inventory count are dual-purpose tests because they relate to:
- Accuracy of the physical count, and
- Effectiveness of controls over counting and pricing.
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