Response to the following problem:
Since 1938, when auditors failed to uncover fictitious inventory recorded by the McKesson & Robbins Company, auditors have been ordinarily required to physically observe the counting of inventory. It is important to recognize that auditors are not required to actually count the inventory for inclusion on the balance sheet, but they are required to observe the inventory being counted. Occasionally, companies employ inventory specialists to perform their inventory counts. Retail Grocery Inventory Service, now known as RGIS, started in 1958 by offering inventory services to grocery stores and is now the largest inventory services company in the world. Visit the RGIS (www.rgisinv. com) Web site and answer the following questions.
Required:
a. Under the link to "Case Studies," read the case about Boeing and the Royal Air Force (RAF) in Great Britain. How did RGIS assist Boeing in its inventory management?
b. What created the need for Boeing to use a service provider such as RGIS?
c. Does an auditor's responsibility for observing the physical inventory differ if a company hires an inventory specialist such as RGIS to perform counts as opposed to having its own employees perform inventory counts?
d. Would your expectations of the results of the physical observation of a client's inventory change if a client hired a company such as RGIS?
e. What are the advantages and disadvantages of hiring an inventory specialist such as RGIS?