Discussant's response to "Auditor evidential planning judgments";

              Discussant's Response to "Auditor Evidential Planning Judgments"
Robert H. Temkin
Arthur Young & Co.
It is indeed an honor for me to participate in this symposium as a discussant and a special pleasure to follow Professor Wright. Dr. Wright is Harold A. Mock Professor at The Northeastern University, which is, of course, located in Boston, my once and, I'm glad to say, future home.
Harold Mock was the managing partner of the Boston office of Arthur Young when I joined the firm in 1964. He was the consummate professional, an astute manager, a superb technician, and a man of the greatest personal and professional integrity. He was very good to this junior auditor and I remember him with great affection. It is good to see the professorship that carries Harold's name in the hands of so distinguished an academician.
This is my first experience as a discussant at an academic conference, so I have chosen to approach this assignment in a manner similar to that of a concurring partner on an audit, something with which I am familiar. As a result, however, my remarks focus more on the problems I had with the paper and the case study rather than on the good things accomplished and presented by the researchers in the paper. Actually, I really want to talk about only a few things related to this case study and paper. I want to discuss some possible causes of the results as well as the conclusions of the research.
Designing a case study to deal with as complex a matter as an inventory audit is a difficult task and Drs. Wright and Mock have done an excellent job. Nonetheless, the information is not, and probably could not be, complete. Accordingly, the auditor must answer a number of questions on his or her own, and these questions are not unimportant.
For example, why does a client with perpetual records and strong controls take a physical inventory every year? What has been the experience with the physical inventory? Are "book to physical" differences common or uncom­mon?
How reliable are the perpetual records? How often are they reconciled to the financial records? Further, the case study does not address in detail how the physical inventory is to be compiled and priced, or provide the ability, except intuitively, to assess the risk of errors in compiling the inventory, errors in extension or footing, or the risk in incorrect prices being used. The auditor also needs to guess, in this case, how labor and overhead are applied to the inventory and whether the case includes auditing these components of the inventory.
As I said, the case study is excellent. If all the information were to be provided, the case would be unreadable. Nonetheless, when auditors need to make assumptions about the risks of certain types of errors (stated otherwise, about certain financial statement assertions), the auditors will, of course, differ and produce different audit approaches.
115