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This is for people who google and can’t find what an inventory tag is. This is in relation to Becker question CPA-02443

Au May 95 #53.

Inventory Tag or Inventory Tags – When taking stock, an inventory tag is place on each pile/bin of like inventory showing the quantity either by physical count or weight. Generally, each inventory tag has two parts – one that stats in the bin/pile and the other part is detached and goes to the clients inventory report.

Additionally, the question is incorrect it should be “vouch” instead of trace. The question is as follows:

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

a. Inventory tags noted during the auditor’s observation to items listed in receiving reports and vendors’ invoices.

b. Inventory tags noted during the auditor’s observation to items listed in the inventory-listing schedule.

c. Items listed in the inventory-listing schedule to inventory tags and the auditor’s recorded count sheets.

d. Items listed in receiving reports and vendors’ invoices to the inventory-listing schedule.

The correct answer is C. The provided explanation is “Tracing from the inventory schedule to the inventory tags and the auditor’s recorded count sheets verifies the validity (existence) of the items. Note that the correct term for the directional test for existence is “vouch.” However, in practice (and on the CPA Exam), the term trace is sometime used interchangeably with the term vouch.”