What is Inventory held by third parties?
In short
When an entity's inventory is held by others, such as in a public warehouse or with consignees, the auditor confirms the quantities and condition directly with the custodian.
Key takeaways
- If the inventory is material, the auditor may also observe counts or inspect the custodian's reports on its controls.
- The auditor considers the custodian's integrity and independence.
- Goods held for others at the client's premises must be excluded from its inventory.
Where it's tested
AUD: Evidence: Types & Procedures — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An auditor selects recorded sales transactions from the sales journal and examines the related shipping documents and customer orders. This procedure primarily tests which assertion?