Question

Which of the following situations would most likely require special audit planning?

A) Some items of factory and office equipment do not bear identification numbers.

B) Depreciation methods used on the client's tax return differ from those used on the books.

C) Assets costing less than $500 are expensed even though the expected life exceeds one year.

D) Inventory is comprised of precious stones.

Answer 1

Special audit planning is most necessary for inventory consisting of precious stones due to valuation complexities and security concerns.

Step-by-step explanation:

The situation that would most likely require special audit planning is when inventory comprises of precious stones. Precious stones, being of high value and often subject to market price volatility, significantly increase the risk and complexity of the audit. Specific considerations such as expert valuations, security of the inventory, and detailed inspection procedures need to be planned. Unlike the other options, which are more routine in nature, precious stones present unique challenges that can significantly affect financial statements.