Final answer:
An auditor cannot observe inventory using a generalized audit software package, but can perform other steps such as selecting samples, analyzing data, and recalculating balances.
Step-by-step explanation:
When conducting field work for a physical inventory, an auditor cannot perform the step of observing inventory using a generalized audit software package. Generalized audit software packages are software tools that auditors use to conduct data analysis and perform audit procedures. However, observing inventory requires physical presence and visual inspection, which cannot be done using software. The other steps mentioned in the options, such as selecting sample items of inventory, analyzing data resulting from inventory, and recalculating balances in inventory reports, can all be performed using a generalized audit software package. These software programs allow auditors to extract and analyze data, select samples, and perform calculations efficiently.