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You are involved in your CPA firm's first audit of Zorostria, a retailer of artwork, primarily paintings and photographs purchased from artists in Southeast Asia (particularly Vietnam, Cambodia, and Laos.) Zorostria has stores in seven cities throughout the United States, Mexico, and Canada.
Discuss difficulties you should anticipate in planning the observation of physical inventory on this engagement because of:
a. The different locations of stores.
b. The nature of artwork.
c. Assume that Zorostria's records indicate that it shipped goods on December 31 for a very major sale to a customer in Edmonton, Alberta, Canada.
(1) Since it was shipped as of December 31, does this represent a sale for the year ended on that date?
(2) What additional audit steps could be taken to determine that the sale is valid?

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