Scenario: An auditor is auditing the inventory of a jewelry manufacturer. The inventory consists of loose diamonds and gold bars. The auditor does not have the expertise to distinguish real diamonds from fakes. <br/><br/>What is the auditor's BEST course of action?

Answer options:

Rely on the management representation letter stating the inventory is genuine.

Engage a gemologist as an auditor's specialist to assist with the inventory observation and valuation.

Perform a 'roll-forward' of inventory from the prior year.

Disclaim an opinion due to lack of competence.

How to approach this question

Lack of expertise -> Use a Specialist. Don't guess.

Full Answer

B.Engage a gemologist as an auditor's specialist to assist with the inventory observation and valuation.✓ Correct

Engage a gemologist as an auditor's specialist to assist with the inventory observation and valuation.

AU-C 620 addresses using the work of an auditor's specialist. If the auditor does not possess the necessary expertise to obtain sufficient appropriate audit evidence (e.g., valuing diamonds), they should engage a specialist.

Common mistakes

Thinking the auditor can just rely on management or skip the procedure.

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