Your audit client, Wigley, is a retail department store that does not produce any products. You are currently working on the inventory portion of the audit. In obtaining audit evidence in support of financial statement assertions, the auditor develops specific audit objectives in response to those assertions. Audit procedures are then selected to accomplish audit objectives.
For each specific inventory audit objective listed (Audit Objectives tab) select the most closely related account balance financial statement assertion and the most appropriate audit procedure. Financial statement assertions and audit procedures may be selected once, more than once, or not at all.

Financial statement assertion

Audit procedure

A.

Completeness

F.

Examine current vendors’ price lists.

B.

Existence

G.

Review drafts of the financial statements.

C.

Rights and Obligations

H.

Select a sample of items during the physical inventory count and determine that they have been included on count sheets.

D.

Valuation and Allocation

I.

Select a sample of recorded items and examine supporting vendors’ invoices and contracts.

E.

Presentation and disclosure

J.

Select a sample of recorded items on count sheets during the physical inventory count and determine that items are on hand.

K.

Test reasonableness of direct labor rates.

Specific audit objectives

(A)

(B)

(C)

(D)

(E)

(F)

(G)

(H)

(I)

(J)

(K)

1.

The entity has legal title to inventories.

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

2.

Recorded inventory quantities include all products on hand.

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

3.

Inventories are reduced, when appropriate, to replacement costs or net realizable value.

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

4.

Cost of inventories is properly calculated.

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

5.

The major categories of inventories and their basis of valuation are adequately reported in the financial statements.

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο

Ο