Millie and Oliver are beginning the audit of Seagroves LLC, a regional purveyor of fine chocolates and other confectionary products. Millie approaches Oliver and mentions that she has noticed that inventory represents a relatively large amount of the client's total assets. Based on this finding, which of the following is true? Because inventory is immaterial to the financial statements, the auditors should plan to spend less time auditing this area. • Because inventory is material to the financial statements, the auditors will spend more time on this area. Because the client maintains a large store of inventory, there is less risk of obsolescence. O The risk of material misstatement is likely to be assessed as low by the auditor because the client maintains such a large inventory store.
Millie and Oliver are beginning the audit of Seagroves LLC, a regional purveyor of fine chocolates and other confectionary products. Millie approaches Oliver and mentions that she has noticed that inventory represents a relatively large amount of the client's total assets. Based on this finding, which of the following is true? Because inventory is immaterial to the financial statements, the auditors should plan to spend less time auditing this area. • Because inventory is material to the financial statements, the auditors will spend more time on this area. Because the client maintains a large store of inventory, there is less risk of obsolescence. O The risk of material misstatement is likely to be assessed as low by the auditor because the client maintains such a large inventory store.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Millie and Oliver are beginning the audit of Seagroves LLC, a regional purveyor of fine chocolates and other confectionary products.
Millie approaches Oliver and mentions that she has noticed that inventory represents a relatively large amount of the client's total
assets. Based on this finding, which of the following is true?
Because inventory is immaterial to the financial statements, the auditors should plan to spend less time auditing this area.
O Because inventory is material to the financial statements, the auditors will spend more time on this area.
Because the client maintains a large store of inventory, there is less risk of obsolescence.
The risk of material misstatement is likely to be assessed as low by the auditor because the client maintains such a large
inventory store.
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