ACCA Audit and Assurance (F8) Practice Exam

What should auditors ensure regarding inventory records?

1. They are prepared annually

2. They are inadequate

3. They document every detail of sales

4. They are current and sufficient

The correct answer is: They are current and sufficient

Auditors must ensure that inventory records are current and sufficient because accurate and up-to-date records are essential for effective inventory management and financial reporting. This is critical for a number of reasons: 1. **Financial Statement Accuracy**: Inventory values directly impact the cost of goods sold and ultimately affect the profitability of the organization. If the inventory records are not current, the financial statements may misrepresent the financial position of the entity. 2. **Risk Management**: Current records help in assessing the value of inventory and identifying any potential issues such as obsolescence, shrinkage, or overstock. This information is vital for making informed business decisions and risk assessments. 3. **Compliance and Auditing Standards**: Regulatory frameworks and auditing standards require that an entity maintains adequate documentation and records related to its inventory. This ensures that the auditors can evaluate whether the financial statements provide a true and fair view. 4. **Operational Efficiency**: Sufficient inventory records support better inventory management practices, ensuring that the organization can meet customer demand without over-investing in stock that may not sell. In summary, maintaining current and sufficient inventory records is fundamental for ensuring that financial reporting is reliable, that stakeholders can make informed decisions based on accurate data, and that compliance with applicable standards