Week 6 discussion and participation Essay Example | Topics and Well Written Essays - 1000 words

Week 6 discussion and participation - Essay ExampleThe auditor must accurately access whether the inventory tally process the corporation is using is adequate.The most important and valuable account in the balance sheets of companies is the cash account. A company can have millions of dollars in assets, but if the firm runs out of cash they run a high risk of going out of business. An important aspect of the cash in the vernacular and transaction cycles is to have clear separation of duties. Tests of controls and substantive tests of transactions are required to have an effective audit of the cash balance of a company. gold is an account that is included in several cycles with the exception of inventory and warehousing. Cash is also one of the last cycles audited because the evidence accumulated of cash balances is dependent on the other cycles. Some of the cycles that are correlated to the activities of the cash cycle areI agree with you that the most important phase for designi ng tests of inventory balances is the true(a) observation of the inventory count. A lot of theft and fraud often occurs in this cycle because companies have inventory balances worth millions of dollars. A simple behavior in which a company can cheat an audit is by including in its inventory goods that have become obsolete. This often occurs in technological industries such(prenominal) as the computer industry. As you mentioned in your response it is important for auditors to pay close attention to the internal controls that were established by the management of the company. If a company has weak internal controls the auditors have to pay closer attention to the inventory cycle to rule out the potential of fraudulent activity.In my response to this read/write head I also argued that designing tests of inventory balance was the most crucial phase of the audit inventory cycle. I did not know about the population of SAS 1. It makes a lot of sense to me that auditors should be presen t during the physical inventory