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:

Question operating about the possibility of obsolete or slow-moving inventory.

a) Type of Audit Evidence: Confirmation; Balance-Related Audit Objectives: Existence.
b) Type of Audit Evidence: Inspection of Documents; Balance-Related Audit Objectives: Existence and Valuation.
c) Type of Audit Evidence: Observation; Balance-Related Audit Objectives: Valuation.
d) Type of Audit Evidence: Analytical Procedures; Balance-Related Audit Objectives: Completeness.

Answer 1

The audit procedure of questioning personnel about obsolete inventory is aligned with Inspection of Documents as the type of audit evidence and satisfies the audit objectives of Existence and Valuation.

Step-by-step explanation:

When conducting an audit, auditors use various types of audit evidence to satisfy different balance-related audit objectives. The audit procedure in question involves questioning operating personnel about the possibility of obsolete or slow-moving inventory. This procedure does not fit squarely into types like confirmation or observation but instead relies on an inquiry which is a form of inspection of documents and discussions with management or staff. The objectives that this audit evidence satisfies are primarily Existence and Valuation. The auditors are verifying that the inventory exists and is not overstated in value due to obsolescence.

It is important that the evidence collected is rooted in verifiable facts and is selected to best support the audit objectives, while also meeting any specific requirements from an instructor or audit standard. In audits, confirming the valuation of inventory and ensuring completeness of records are essential for a fair representation of financial statements.