ISA 501 Audit Evidence specified consideration for selected items MCQs

1. ISA 501 Audit Evidence – specific considerations for selected items requires the auditor to:

1. 1. Attend the physical inventory count (unless impracticable), if inventory is material to the financial statements
   2. Perform procedures on the final inventory records to determine whether they accurately reflect the count results.
   3. Both A&B
   4. None

2. The inventory count is the responsibility of the client. The auditor does not perform the count. Attendance at the inventory count is required to:

1. 1. Evaluate management’s instructions and procedures for the inventory count.
   2. Observe the performance of the count.
   3. Inspect the inventory.
   4. Perform test counts.
   5. All of the above

3. ISA 501 Audit Evidence – special considerations for selected items requires the auditor to design and perform audit procedures in order to identify litigation and claims involving the entity which may give rise to a risk of material misstatement.

1. 1. The above statement is correct
   2. The above statement is incorrect

4. The reasons for physical counts of inventory include:

1. 1. Physical counts may be fairly easy to arrange, particularly where most items of inventory are held in a limited number of physical locations.
   2. Physical counts can be used by the entity to check the accuracy of its inventory records, where it maintains continuous inventory records.
   3. A physical count of inventory can also be used to check the physical condition of inventory, and whether there has been any deterioration in condition.
   4. All of the above

5. The audit work involved in verifying inventory quantities will include:

1. 1. Obtaining the final inventory sheets that were prepared by the client’s staff during their inventory count and confirm that no sheets are missing.
   2. Confirm that inventory belonging to the client, but held by third parties, is included on the inventory sheets.
   3. Confirm that inventory belonging to third parties, but on the client’s premises at the date of the count, is not included on the inventory sheets.
   4. All of the above

6. Control weaknesses in the client’s inventory counting procedures may be observed by the auditor. These might include:

1. 1. Failure to pre-number the count sheets
   2. Inventory may not be marked when it is counted
   3. Entering the quantities counted on the count sheets in pencil
   4. All of the above

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