An auditor is conducting an examination of the financial statements of a wholesale cosmetics distributor with an inventory consisting of thousands of individual items. The distributor keeps its inventory in its own distribution center and in two public warehouses. An inventory computer file is maintained on a computer disk, and at the end of each business day, the file is updated. Each record of the inventory file contains the following data:
Item number
Location of item
Description of item
Quantity on hand
Cost per item
Date of last purchase
Date of last sale
Quantity sold during year
The auditor is planning to observe the distributor’s physical count of inventories as of a given date. The auditor will have available a computer tape of the data on the inventory file on the date of the physical count and a general-purpose computer software package.
Required
The auditor is planning to perform basic inventory auditing procedures. Identify the basic inventory auditing procedures and describe how using the general-purpose software package and the
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