Mary Howard, CPA, has long audited the Wheat City Grain
Company’s financial statements. Much of Wheat City’s assets consist
of wheat stored in three of its grain elevators, and the Company
maintains perpetual inventory records of the quantity of wheat
stored there. Concurrently, on a surprise basis, at different times
each month, state grain inspectors also “count” the quantity of
wheat found in these elevators—and have found no material
differences in the perpetual records for the five years that they
have performed this function. To save both time and audit fees,
Mary wants to rely on the state inspectors’ counts instead of her
making independent counts thereof. Can Mary rely on an objective,
independent third party (i.e., part of a government agency) to
substitute required generally accepted auditing procedures (i.e.,
observing the counting of the client’s inventory)?

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