Inventory – existence assertion

CPA Exam Forum AUD AUD Review Inventory – existence assertion

This topic contains 7 replies, has 0 voices, and was last updated by  Peanut 4 years, 7 months ago.

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  • #166462

    goforCPA
    Member

    Hi all….

    The below was from a multiple choice:

    1) Tracing Inventory tags to the Listing of inventory = Existence

    The below is from the Becker book:

    2) “The auditor should test the existence of the items on the client’s inventory listing/report sheets by vouching a sample of items from the inventory listing/report sheet to the corresponding inventory tags”

    To me statements 1) & 2) above are opposing each other. Can someone explain which is correct for the existence assertion PLEASE???

    #324644

    mcwingnutz
    Member

    In my understanding it should be:

    Floor to Report = Completeness (which it appears your answer #1 actually is this)

    Report to Floor = Existence (which is what the explanation is in #2)

    So either we both are misunderstanding the wording of that answer, or it is just wrong.

    #324645

    apbandj
    Member

    This has got me all confused, too!

    Like Mcwingurtz said, I also believe #1 should be completeness. And in my list of keywords, I have that trace = completeness and vouch = existence.

    Would you mind posting the entire text of the MCQ for those of us who don’t have Becker?

    #324646

    gabykats
    Member

    your multiple choice answer in one (1) is definitely wrong.

    the tag is attached to the inventory item right? so how could the auditor need assurance that it exists?

    testing for existence assertion here is inefficiency.

    the best audit evidence is your own knowledge. something you can verify by your own means. then external evidence, then internal evidence… becker has a mnemonic.. a e i o or sumthing… (hate mnemonics.. so i couldnt tell u offhand wat the o was for.) other evidence???

    #324647

    TC – VE

    T before V

    C before E

    TC – VE

    #324648

    goforCPA
    Member

    All…I cannot find the exact MCQ but I made a note of the answer in my notes and while I was going through my notes I didn’t think this sounded right. Based on some of your responses and what the book says I’ll go with vouching from listing to the tags = existence.

    Thanks for your input…

    #324649

    CashMoney10
    Member

    Tracing/Completeness = Source to book

    Vouching/Existence = Book to source

    #324650

    Peanut
    Participant

    Found it! I read this the other day and knew of the question I’ll rewrite it

    To gain assurance that all inventory items in a client’s inventory listing schedule are valid, an auditor most likely would trace:

    A. Inventory tags noted during the auditor’s observation to items listed in the inventory-listing schedule

    B. Inventory tags noted during the auditor’s observation to items listed in receiving reports and vendors’ invoices

    C. Items listed in the inventory-listing schedule to inventory tags and the auditor’s recorded count sheets

    D Items listed in receiving reports and vendor’s invoices to the inventory-listing schedule

    Correct answer: C Tracing from the inventory schedule to the inventory tags and the auditor’s record cound sheets verifies the validity (existence) of the items

    They try to trick you with the trace/exsistence

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