Question

The primary objective of a CPA's observation of a client's physical inventory count is to?

1) discover whether a client has counted a particular inventory item or group of items.
2) obtain direct knowledge that the inventory exists and has been properly counted.
3) provide an appraisal of the quality of the merchandise on hand on the day of the physical count.
4) allow the auditor to supervise the conduct of the count to obtain assurance that inventory quantities are reasonably accurate.

Answer 1

1) discover whether a client has counted a particular inventory item or group of items.

The primary objective of a CPA's observation during a physical inventory count is to verify the existence and accuracy of inventory items.

Step-by-step explanation:

The primary objective of a CPA's observation of a client's physical inventory count is to obtain direct knowledge that the inventory exists and has been properly counted.

This procedure provides the auditor with evidence that the inventory quantities reflected in the client's records accurately represent the physical inventory on hand.

While a CPA may note whether a particular inventory item has been counted or provide supervision to aid in accurate counting, their main concern is not to appraise the quality of the inventory or to manage the count itself but to confirm its existence and the accuracy of the count.

The primary objective of a CPA's observation of a client's physical inventory count is to obtain direct knowledge that the inventory exists and has been properly counted.

This means that the CPA wants to confirm that the physical inventory matches the records and that it has been accurately counted.

They are not conducting an appraisal of the quality of the merchandise or supervising the conduct of the count, although these may be additional objectives during the observation process.