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Question - Ace Corporation does not conduct a complete annual physical count of purchased parts and supplies in its principal warehouse, but uses statistical sampling instead to estimate the year-end inventory. Ace maintains a perpetual inventory record of parts and supplies and believes that statistical sampling is highly effective in determining inventory values and is sufficiently reliable so as to make a physical count of each item of inventory unnecessary.
a. Identify the audit procedures that should be used by the independent auditor that change or are in addition to normal required audit procedures when a client utilizes statistical sampling to determine inventory value and does not conduct a 100 percent annual physical count of inventory items.
b. List at least 10 normal audit procedures that should be performed to verify physical quantities whenever a client conducts a periodic physical count of all or part of its inventory.
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