Question

Which of the following types of tests is the most persuasive if an internal auditor wants assurance of the existence of inventory stored in a warehouse?

1) Examining the shipping documents that support recorded transfers to and from the warehouse.
2) Obtaining written confirmation from management.
3) Physically observing the inventory in the warehouse.
4) Examining warehouse receipts contained in the engagement client's records.

Answer 1

The most persuasive method for an internal auditor to confirm the existence of inventory is by physically observing the inventory in the warehouse.

Step-by-step explanation:

The question pertains to the most persuasive test an internal auditor can perform to gain assurance about the existence of inventory stored in a warehouse. Out of the options provided, the most convincing method would be physically observing the inventory in the warehouse. This direct verification of assets provides concrete evidence of their existence and condition.

Other methods such as examining shipping documents, obtaining written confirmation from management, and examining warehouse receipts, while useful, may not offer the same level of assurance because they rely on secondary evidence that could be incomplete or inaccurate. Physical inventory observation can also help in verifying the accuracy of the information contained in these documents.