Inventory Count Observation: Planning and Substantive Procedures. Sammy Smith isthe partner in charge of the audit of Blue Distributing Corporation, a wholesaler that ownsone warehouse containing 80 percent of its inventory. Smith is reviewing the audit documentation that was prepared to support the firm’s opinion on Blue’s financial statements andwants to be certain that essential audit procedures are well documented.Required:a. What evidence should Smith expect to find indicating that the observation of the client’sphysical count of inventory was well planned and that assistants were properly supervised?b. What substantive procedures should Smith find in the audit documentation of management’s balance assertions about existence and completeness of inventory quantities at theend of the year? (Refer to Appendix 9B for the audit plan’s procedures.)
Inventory Count Observation: Planning and Substantive Procedures. Sammy Smith is
the partner in charge of the audit of Blue Distributing Corporation, a wholesaler that owns
one warehouse containing 80 percent of its inventory. Smith is reviewing the audit documentation that was prepared to support the firm’s opinion on Blue’s financial statements and
wants to be certain that essential
Required:
a. What evidence should Smith expect to find indicating that the observation of the client’s
physical count of inventory was well planned and that assistants were properly supervised?
b. What substantive procedures should Smith find in the audit documentation of management’s balance assertions about existence and completeness of inventory quantities at the
end of the year? (Refer to Appendix 9B for the audit plan’s procedures.)
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