[jasonrobbins]

Just when I thought I had this stuff down, get a question like this that throws me for a loop…please help

In Becker A4 MCQ:

To gain assurance that all inventory items in a client’s inventory listing schedule are valid, an auditor most likely would TRACE:

Correct answer: Items listed in the inventory listing schedule to inventory tags and the auditors recorded count sheets

My answer: Inventory tags noted during the auditors observation to items listed in the inventory listing schedule

AUD- 97 1x
REG- 81 1x
BEC- 79 1x
FAR- 88 1x

DONE!

10/1/12 to 2/28/14

[noluckcandidate]

In the glossary of the Becker text book look up “tracing” – there is a note that says sometimes the term trace can be used to generically compare one item to another, without indication of direction.

[jasonrobbins]

I guess so because there is another similar question which of course is simple (notice there was not E&O assertion option):

“The auditor's inventory observation test counts are traced to the client's inventory listing to test for which

of the following financial statement assertions?”

Completeness. (correct answer, which I picked)

Rights and obligations.

Allocation and valuation.

Understandability and classification.

AUD- 97 1x
REG- 81 1x
BEC- 79 1x
FAR- 88 1x

DONE!

10/1/12 to 2/28/14

[Futile]

“Trace” is a poor word choice, no doubt meant to trick you. However, it doesn't matter. You want to check that all inventory items in a client's inventory listing schedule are VALID. In other words, you are testing for EXISTENCE. Therefore, you would go from the listing schedule (records) to the tags (physical observation).

CPA exam: Done!

Thank You, Lord.

[jasonrobbins]

Even still, since you start with the inventory listing and go down to the inventory tags, isn't that going from balance item to source document?

AUD- 97 1x
REG- 81 1x
BEC- 79 1x
FAR- 88 1x

DONE!

10/1/12 to 2/28/14

[Futile]

The inventory listing schedule is an accounting record, so it represents the balance amount. The tags are not source documents….They are a by-product of the physical inventory count.

Anyway, I was trying to say that you shouldn't rely on whether the question says “trace” or “vouch.” As this question shows, it can throw you off! Look at what they want you to do, instead. (In this question, they want you to go from the recorded balance/item to the physical item, which represents testing for existence. The answer you selected goes in the opposite direction, from the physical item to the recorded item, which represents testing for completeness.)

CPA exam: Done!

Thank You, Lord.

[jasonrobbins]

Cool, thanks Futile! That was actually really helpful

AUD- 97 1x
REG- 81 1x
BEC- 79 1x
FAR- 88 1x

DONE!

10/1/12 to 2/28/14

[Author]

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