Reference no: EM132654537

The following deficiencies occurred during an audit of inventory:

a. The audit firm "left the extent of various observations testing to the discretion of auditors, not all of whom were aware of significant audit conclusions which related directly to the extent of testing. Observations of inventory counts at year end were confined to six locations (representing about 40% of the total inventory in over 300 locations) as opposed to nine in the preceding year. The field auditors did not adequately control the inventory tags and the auditor did not detect the creation of bogus inventory tags which were inserted in the final inventory computations.'

b. The company did not use pre-numbered purchase orders and shipping documents.

c. Because the company did not provide sufficient invoices as requested, the auditors relied primarily on vendor catalogues, price lists and vendor invoices to test the accuracy of the company's inventory pricing representations.

Required:

Problem 1: For each of the deficiencies identified, indicate the appropriate action that should have been taken by the auditor.