Financial Statement Assertions and Audit procedures

Question 1

Cost of inventories is properly calculated.

Answer 1

Valuation and Allocation & Select a sample of recorded items and examine supporting vendors’ invoices and contracts.

Question 2

The major categories of inventories and their basis of valuation are adequately reported in the financial statements

Answer 2

Presentation and Disclosure & Review drafts of the financial statements.

Question 3

Inventories are reduced, when appropriate, to replacement costs or net realizable value.

Answer 3

Valuation and Allocation & Examine current vendors’ price lists.

Question 4

Recorded inventory quantities include all products on hand

Answer 4

Completeness & Select a sample of items during the physical inventory count and determine that they have been included on count sheets.

Question 5

The entity has legal title to inventories

Answer 5

Rights and Obligations & Select a sample of recorded items and examine supporting vendors’ invoices and contracts.