Question

Valuation and allocation is one of the general assertions regarding a client's inventory balance. Which of the following is not a substantive auditing procedure related to this assertion?

A)Comparing the current cost of inventory to its net realizable value.
B)Confirming the market value of inventory with suppliers.
C)Testing the mathematical accuracy of the inventory compilation.
D)Analyzing the adequacy of the provision for obsolete or slow-moving inventory.

Answer 1

The correct answer is B) Confirming the market value of inventory with suppliers.

Step-by-step explanation:

The correct answer is B) Confirming the market value of inventory with suppliers.

Valuation and allocation is a general assertion related to a client's inventory balance in auditing. It involves ensuring that the inventory is valued correctly and allocated appropriately in the financial statements.

The substantive auditing procedures related to this assertion involve examining the accuracy, existence, and valuation of inventory. A) Comparing the current cost of inventory to its net realizable value is a substantive procedure as it helps determine if the inventory is valued appropriately. C) Testing the mathematical accuracy of the inventory compilation is also a substantive procedure as it ensures the accuracy of inventory calculations.

D) Analyzing the adequacy of the provision for obsolete or slow-moving inventory is another substantive procedure related to this assertion. It involves assessing whether the company has made appropriate provisions for inventory that may be obsolete or slow-moving.