ExpertMedium1 markMultiple Choice
CPA · Question 42 · Area 3: Performing Procedures
During the audit of inventory, the auditor observes the client's physical count. The auditor notices that several pallets of goods are tagged as 'Consignment - Do Not Count'. What should the auditor do?
During the audit of inventory, the auditor observes the client's physical count. The auditor notices that several pallets of goods are tagged as 'Consignment - Do Not Count'. What should the auditor do?
Answer options:
A.
Accept the tag as evidence and exclude the goods from the count.
B.
Include the goods in the count regardless of the tag.
C.
Inspect the consignment agreements and confirm with the consignor to verify ownership.
D.
Request that the client purchase the goods immediately.
How to approach this question
Verify Rights & Obligations. If it says 'Not Ours', prove it.
Full Answer
C.Inspect the consignment agreements and confirm with the consignor to verify ownership.✓ Correct
To verify the Rights and Obligations assertion for inventory, the auditor must ensure that goods excluded from inventory (like consignment in) actually belong to others. Reviewing agreements and confirming is the appropriate procedure.
Common mistakes
Ignoring the goods or including them without verification.
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