Wayne disagrees that audit data analytics is the MOST appropriate choice because they will need to physically verify the existence of the inventory. The Option A is correct.
In this case, electronic records are beneficial, they don't confirm the actual presence of physical inventory. The records being in electronic format are advantageous for analysis but to test the completeness assertion and ensure all inventory is accounted for, physical sampling techniques are necessary.
Given that the client has a relatively small inventory and maintains basic records, utilizing audit sampling techniques would be a more practical and suitable approach.
Therefore, ADA alone may not provide the comprehensive assurance required for this audit and this makes it less appropriate in this context. So, the Option A is correct.
The full question is:
Derek and Wayne, two audit managers assigned to the audit of Fitzgerald Enterprises, LLC are discussing how best to audit the inventory accounts of the client. Derek suggests that because the client maintains all records in electronic format, this would be a good use of audit data analytics (ADA). Wayne disagrees that audit data analytics is the MOST appropriate choice in this case for which of the following reasons? At some point, we are going to need to check the physical existence of inventory. It may be beneficial to us that the records are in electronic form, but that doesn't help us with checking it really exists. The records being in electronic format are certainly beneficial to us, but we will need to employ physical sampling techniques in order to test the completeness assertion associated with the inventory accounts. It would be easier and more appropriate for us to use an audit sampling technique, as the client doesn't maintain a large amount of inventory and keeps basic records only. None of the choices is correct.