Question

Circumstances that may allow the auditors to obtain satisfaction concerning inventories even when the physical count was not observed include:

-records showing a well planned yr end count
-making of test counts
-strong internal controls

Answer 1

Auditors can obtain satisfaction concerning inventories without physical count through well-planned year-end records, test counts, and strong internal controls.

Step-by-step explanation:

Auditors may obtain satisfaction concerning inventories even when the physical count was not observed under certain circumstances:

1. Records showing a well-planned year-end count: If the company has maintained accurate and detailed records of the inventory, including proper documentation and reconciliation, auditors may rely on these records to validate the inventory balances.
2. Making of test counts: Auditors may perform sample test counts and compare them to the records to assess the accuracy of the inventory. If the test counts align closely with the records, it can provide satisfaction to the auditors.
3. Strong internal controls: If the company has implemented robust internal controls over its inventory management, such as regular reconciliations, segregation of duties, and regular audits, auditors can gain confidence in the reliability of the inventory records.