Chapter 13, Problem 13.1RQ

To determine

Concept Introduction:

Inventory audit: An organization may be trading or manufacturing or a service provider. Every type of organization holds some kind of inventories and inventory has the same important as of the blood in the body. Auditors take special care while doing inventory audit because there are high chances of misstatements in inventory transactions.

To discuss: The reason why inventory is considered as one of the most complex parts of the audit.

Explanation of Solution

Inventory is like blood for any organization and major transactions of an organization belongs to inventories. It is very important for an auditor to make appropriate audit plan for inventory audit. Inventory audit is also one of the most complex parts of the audit because inventory movement does not top even while performing the audit. So it becomes difficult for the auditors to check the amount of inventory when it is ever changing. Another difficulty for inventory is that inventory is placed at different places of the organizations which may create a geographical barrier for the auditor of inventory checking.