
EBK PRINCIPLES OF AUDITING & OTHER ASSU
21st Edition
ISBN: 9781260299434
Author: WHITTINGTON
Publisher: YUZU
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Question
Chapter 12, Problem 1RQ
To determine
List the factors that would make the substantiation of the inventory a difficult task.
Expert Solution & Answer

Explanation of Solution
Inventory:
Inventory refers to the goods and services that a business holds for the purpose of resale.
Inventory system:
It is the process of recording inventory movement in the store.
List the factors that would make the substantiation of the inventory a difficult task:
Following are the factors that would make the substantiation of the inventory a difficult task:
- There is a variety of method of
valuation of inventory such as FIFO, LIFO and weighted average method. - There is a variety of material used in the production of the finished goods. The identification and valuation of the material would require special skills.
- The value of the inventory directly affects the profit of the company so there are high chances of fraud.
- The flow of inventory is very high throughout the year as the production continues for the whole year. A high flow of inventory would make it difficult to monitor.
Thus, the variety of methods of valuation and the high flow of inventory would make it difficult to audit the inventory.
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Chapter 12 Solutions
EBK PRINCIPLES OF AUDITING & OTHER ASSU
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