Question

BASED ON CONVERSATIONS WITH THE OWNER-MANAGER OF AN AUDIT CLIENT, the auditor ascertained that the company's primary motivation is to avoid paying income taxes. Based on this motivation, which account balance assertion for ending inventory will the auditor be most concerned about verifying?

Answer 1

The auditor would be most concerned about verifying the account balance assertion for valuation or measurement of ending inventory.

Step-by-step explanation:

The auditor would be most concerned about verifying the account balance assertion for valuation or measurement of ending inventory.

Since the company's primary motivation is to avoid paying income taxes, there is a risk that the company could manipulate the valuation or measurement of ending inventory to reduce their taxable income.

For example, the company might overstate the value of inventory, resulting in higher expenses and lower taxable income. Therefore, the auditor would focus on ensuring that the ending inventory is accurately valued or measured.