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:

Test the extension of unit prices times quantity on the inventory list for a sample of inventory items, test foot the list, and compare the total to the general ledger.

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 testing the inventory list calculation involves Reperformance as the type of audit evidence; this satisfies Accuracy and Valuation as balance-related audit objectives. Comparing the inventory total with the general ledger fulfills Completeness and Accuracy objectives.

Step-by-step explanation:

Identifying Audit Evidence and Related Audit Objectives

When auditors test the extension of unit prices times quantity on an inventory list, the type of audit evidence they are using is Reperformance. This involves the auditor independently checking the calculations (extensions and footings) to verify their accuracy. The related balance-related audit objectives that are satisfied include Accuracy, ensuring that the recorded amounts are correct, and Valuation, confirming that the inventory is valued properly in accordance with relevant accounting standards.

Moreover, comparing the totaled amount from the inventory list to the figure in the general ledger ensures that the balance is stated at the right amount and corresponds with the ledger, satisfying the Completeness and Accuracy audit objectives. This ensures all inventory that should be recorded is recognized and is done so accurately.

The information above highlights the significance of selecting appropriate audit evidence and how it supports various audit objectives. Understanding and applying the right evidence based on the context and requirements are crucial in auditing, mirroring the process of choosing evidence for effective argumentation in other fields as well.