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:

Send letters directly to third parties who hold the client's inventory, and request that they respond directly to the auditors.

a) Type of Audit Evidence: Inquiry; Balance-Related Audit Objectives: Valuation.
b) Type of Audit Evidence: Physical Examination; Balance-Related Audit Objectives: Accuracy.
c) Type of Audit Evidence: Reperformance; Balance-Related Audit Objectives: Valuation.
d) Type of Audit Evidence: Inspection of Documents; Balance-Related Audit Objectives: Completeness and Accuracy.

Answer 1

The audit procedure of sending confirmation letters to third parties who hold the client's inventory is characterized by Inspection of Documents as the type of audit evidence, which satisfies the balance-related audit objectives of Completeness and Accuracy.

Step-by-step explanation:

When conducting an audit, auditors perform various procedures to gather sufficient and appropriate evidence to form an opinion on the financial statements. One such procedure is sending letters directly to third parties who hold the client's inventory, asking them to respond directly to the auditors, also known as confirmation. In this case, the type of audit evidence used is Inspection of Documents. This evidence supports the balance-related audit objectives of Completeness and Accuracy. Confirming inventory holdings directly with third parties provides evidence that all inventory that should be recorded has been (Completeness) and that inventory amounts are accurate (Accuracy).