List and explain the substaintive tests of Cash & Inventory . Substantive test of auditing inventory1. Analytical procedureMake comparison between current inventory balance with inventory balance ofprevious year => check the change/fluctuation of inventory => Possiblyoverstate/understate inventory balance.Compare the current inventory turnovers with the last year's onesCompare the profit margin of current year with last year.Make analysis of the change/fluctuation in purchase within the a yearCompare purchase transactions of current year with last yearSuppose the company is a manufacturer, we have to compare the ratio of directmaterials, direct labour and production overhead of current year with last year.2. Test of detailsWitness of inventory+ Make the plan for witness of inventory+ Implement the witness of inventory: observation of witness, observethe status of inventory,+ Do post-witness procedureCompare beginning balance of inventoryRevaluate the value of COGS, ending inventoryCut-offCheck the allowance for declining in inventoryPresentation and disclosure: Costing method, reason of allowance fordeclining in inventory

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Description: List and explain the substaintive tests of Cash & Inventory . Substantive test of auditing inventory1. Analytical procedureMake comparison between current inventory balance with inventory balance ofprevious year => check the change/fluctuation of inv

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Business

Accounting

List and explain the substaintive tests of Cash & Inventory

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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