Audit and Assurance Practice Exam

Which assertion would be most relevant when verifying that all inventory transactions have been recorded?

1. Existence

2. Completeness

3. Valuation

4. Presentation

The correct answer is: Completeness

The relevance of the assertion related to verifying that all inventory transactions have been recorded is fundamentally tied to the concept of completeness. Completeness is an assertion that ensures all transactions that should be recorded are indeed recorded in the financial statements. When assessing inventory transactions, it is critical to confirm that no transactions have been omitted, which could result in an understatement of inventory and subsequently, assets and expenses. By focusing on completeness, auditors can design procedures that seek out unrecorded transactions, ensuring that the financial statements give a true and fair view of the company's inventory position. If the assertion of completeness is not properly addressed, there is a risk that significant inventory activity could be overlooked, leading to inaccuracies in financial reporting. Thus, completeness stands as the paramount assertion to verify that all incidents of inventory have found their way into the accounting records.