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Hi sir,
1. I would like to know why it is so important for auditor to conduct audit of inventory?
2. What is the differences between class of transaction and account balances?
3. What control should be put in place to detect and prevent fraud?
4. How does audit committee provide additional safeguard for audit independence?
Thanks a lot for solving my doubt1 it is only important if inventory is material. But remember that every extra $ on closing inventory is a $ on profit.
2 Account balances are the end of year balances. Classesof transactions just means posting amounts to the right account. Eg all repair costs should go to yhe repairs account.
3 No special controls. Ordinary controls should help prevent fraud and error.
4 Auditors report findings or difficulties to the audit committee which can raise the matters at the board meeting. Merely reporting to the finance director might mean findings are suppressed to save embarrassment.
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