Question

Identify the type of audit evidence used for each audit procedure.

Identify the general balance-related audit objective or objectives satisfied by each audit procedure.

Audit procedure:

Select a sample of inventory items in the factory warehouse and trace each item to the inventory count sheets to determine whether it has been included and whether the quantity and description are correct.

a) Type of Audit Evidence: Inquiry; Balance-Related Audit Objectives: Existence and Completeness.
b) Type of Audit Evidence: Physical Examination; Balance-Related Audit Objectives: Existence, Completeness, and Accuracy.
c) Type of Audit Evidence: Confirmation; Balance-Related Audit Objectives: Valuation.
d) Type of Audit Evidence: Analytical Procedures; Balance-Related Audit Objectives: Existence and Completeness.

Answer 1

Audit evidence for tracing inventory items to count sheets is Physical Examination, which satisfies the objectives of Existence, Completeness, and Accuracy.

Step-by-step explanation:

The student is asking about the types of audit evidence and the balance-related audit objectives each audit procedure satisfies. When selecting a sample of inventory items in the factory warehouse and tracing each item to the inventory count sheets to determine inclusion, quantity, and description accuracy, the type of evidence used is Physical Examination. This approach verifies the actual existence of the inventory, ensures that all items that should be included are recorded (Completeness), and that the quantity and description on the count sheets match the physical inventory (Accuracy).

• Type of Audit Evidence: Physical Examination
• Balance-Related Audit Objectives: Existence, Completeness, and Accuracy

Physical examination as the type of evidence and existence, completeness, and accuracy as the objectives meet the criteria for objective, verifiable evidence that is relevant and reliable for the purpose of an audit. This method is rooted in factual verification which is crucial in the field of auditing where analytical rigor and empirical evidence are paramount to forming judgements on financial statements.