Correct Answer: D

Explanation: The client is responsible for counting inventory and the auditor is responsible for observing the client's count. Since the timing of the observation depends on the timing of the count, there must be agreement between the auditor and client regarding the inventory observation procedures before the auditor finalizes an audit strategy for inventory.

The incorrect answer choices are evidence-gathering issues that are decided by the auditor without specific regard to timing and other client concerns. Independently of the client, the auditor determines the extent of evidence needed in the audit, the nature of procedures to follow in the audit, and the scope of issues to be addressed in a legal letter.

Today’s question: FAR

Compared to historical cost income from continuing operations, which of the following conditions increases Pollard's current cost income from continuing operations?

A)   Current cost of equipment is greater than historical cost.

B)   Current cost of land is greater than historical cost.

C)   Current cost of cost of goods sold is less than historical cost.

D)   Ending net monetary assets are less than beginning net monetary assets.

Correct Answer: C

Explanation: Holding gains for equipment and land are not part of income from continuing operations. The reduction in cost of goods sold is reflected in income from continuing operations and is not applicable for current cost measurement.

Today’s question: AUD

Of the following which is the least persuasive type of audit evidence?

A)   Documents mailed by outsiders to the auditor

B)   Correspondence between auditor and vendors

C)   Copies of sales invoices inspected by the auditor

D)   Computations made by the auditor

Correct Answer: C

Explanation: The competency (reliability) of evidence depends upon the degree of control exercised over the evidence by the client. The client does have control over sales invoices and, thus, it is the least competent.