The auditor determines that each of the following objectives will be part of your audit of Bozington, Co., Inc. For each audit objective, select a substantive procedure that would help to achieve that objective. Each of the procedures may be used once, more than once, or not at all.
Audit Objective
1. Establish the completeness of inventories.
2. Establish the accuracy of cost amounts of inventories.
3. Determine that the presentation and disclosure of inventories and cost of goods sold is adequate.
4. Establish that the client has rights to the recorded inventories.
5. Establish the existence of ending inventory.
Substantive procedures
a. Examine current vendors’ price lists.
b. Review drafts of the financial statements.
c. Select a sample of items during the physical inventory count and determine that they have been included on count sheets.
d. Select a sample of recorded items and examine supporting vendors’ invoices and contracts.
e. Select a sample of recorded items on count sheets during the physical inventory count and determine that items are on hand.
f. Test the reasonableness of general and administrative labor rates.
