Auditors arrived at tank farm to undertake an inventory

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Reference no: EM131293650

A team of auditors arrived at a tank farm to undertake an inventory count to determine the amount of crude oil stored by their audit client during a year end audit. The auditors obtained the correct calibrations sheets for each oil storage tank that allowed them to convert the number of feet of oil each tank to barrels of crude oil. Then they proceeded through the tank farm with oil company employees and carefully observed the employees using giant dip sticks to determine the depth the oil in each tank and they noted the measurements on their work papers. Then, using the calibration sheets matched to the tank numbers, they used the measurements to convert the observations to barrels of crude and then added it all up.

The oil company substantially overstated the crude oil inventory. The auditing firm was sued for failing to correctly establish the inventory total.

What happened that caused this error, class?

Reference no: EM131293650

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