Scribd Logo
Upload

Welcome to Scribd!

  • 173 views

    Audit of Inventories

    Uploaded by

    yousef
    The primary objectives of an inventory audit are to confirm existence and observe the client's inventory-taking procedures. The auditor must be present for the physical inventory count, whether it occurs at year-end for periodic systems or periodically for perpetual systems. Statistical sampling may be used by clients to reduce full counts. For inventory held at public warehouses, auditors should confirm amounts directly with the warehouse, review the client's oversight procedures if significant, and possibly observe counts or obtain reports on warehouse controls. Analytical procedures and tests of cutoff, consignments, and manufactured costs also impact the inventory audit.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd

    Audit of Inventories

    Uploaded by

    yousef
    173 views21 pages
    The primary objectives of an inventory audit are to confirm existence and observe the client's inventory-taking procedures. The auditor must be present for the physical inventory count, whether it occurs at year-end for periodic systems or periodically for perpetual systems. Statistical sampling may be used by clients to reduce full counts. For inventory held at public warehouses, auditors should confirm amounts directly with the warehouse, review the client's oversight procedures if significant, and possibly observe counts or obtain reports on warehouse controls. Analytical procedures and tests of cutoff, consignments, and manufactured costs also impact the inventory audit.

    Original Description:

    PPT for existence of inventory

    Original Title

    Audit of inventories

    Copyright

    © © All Rights Reserved

    Available Formats

    PPT, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The primary objectives of an inventory audit are to confirm existence and observe the client's inventory-taking procedures. The auditor must be present for the physical inventory count, whether it occurs at year-end for periodic systems or periodically for perpetual systems. Statistical sampling may be used by clients to reduce full counts. For inventory held at public warehouses, auditors should confirm amounts directly with the warehouse, review the client's oversight procedures if significant, and possibly observe counts or obtain reports on warehouse controls. Analytical procedures and tests of cutoff, consignments, and manufactured costs also impact the inventory audit.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    173 views21 pages

    Audit of Inventories

    Uploaded by

    yousef
    The primary objectives of an inventory audit are to confirm existence and observe the client's inventory-taking procedures. The auditor must be present for the physical inventory count, whether it occurs at year-end for periodic systems or periodically for perpetual systems. Statistical sampling may be used by clients to reduce full counts. For inventory held at public warehouses, auditors should confirm amounts directly with the warehouse, review the client's oversight procedures if significant, and possibly observe counts or obtain reports on warehouse controls. Analytical procedures and tests of cutoff, consignments, and manufactured costs also impact the inventory audit.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 21

    1

    What are the primary audit


    objectives with regard to inventory?

    - existence

    2
    What is the primary audit procedure
    with regard to inventory?

    Observe the clients


    inventory-taking
    procedures. 3
    When do client inventory-
    taking procedures occur?
    December
    If the client has a
    periodic inventory
    system, the
    physical inventory
    count determines
    the balance in
    inventory accounts and will probably
    occur on the balance sheet date.
    4
    When do client inventory-
    taking procedures occur?
    If the client has a June
    perpetual inventory
    system, the
    physical inventory
    count may occur
    any time during
    the accounting period.
    Whenever the count occurs, the auditor
    is required to observe. 5
    Some clients use
    statistical sampling in their
    inventory methods.

    why? 6
    Some clients use
    statistical sampling in their
    inventory methods.
    reduces
    the need to count
    every inventory item
    (sample results can be
    statistically extended
    to the population) 7
    How should the auditor test inventory
    held at a public warehouse?

    - direct written confirmation with the


    public warehouse
    - if inventory held at the public ware-
    house is significant:
    ~ review clients procedures for
    investigating and evaluating the
    warehouse

    8
    How should the auditor test inventory
    held at a public warehouse?
    - direct written confirmation with the
    public warehouse.
    - if inventory held at the public ware-
    house is significant:
    ~ review clients procedures for
    investigating and evaluating the
    warehouse
    ~ obtain report from warehouses
    auditor regarding internal controls
    9
    How should the auditor test inventory
    held at a public warehouse?
    - direct written confirmation with the
    public warehouse
    - if inventory held at the public ware-
    house is significant:
    ~ review clients procedures for
    investigating and evaluating the
    warehouse
    ~ obtain report from warehouses
    auditor regarding internal controls
    ~ observe warehouses physical
    counts (if practical)
    10
    inventory audit procedures

    perform
    analytical
    procedures
    to test inventory
    reasonableness

    11
    inventory audit procedures
    regarding the client physical inventory count:
    Review the clients plan for counting
    the physical inventory. Attend
    client count planning
    meetings.

    12
    inventory audit procedures
    regarding the client physical inventory count:
    Observe the physical inventory count.
    Determine whether client counting methods
    are effective.

    13
    inventory audit procedures
    regarding the client physical inventory count:
    Observe the quality and condition of the
    inventory. Consider obsolescence.

    14
    inventory audit procedures
    regarding the client physical inventory count:
    On a random basis:
    - select a sample of inventory items from the
    client count records, find them in the
    warehouse, count them

    15
    inventory audit procedures
    Inquire of client management
    regarding the existence of
    consigned inventories:
    - if a consignee holds a portion of the
    clients inventory, confirm that amount
    with the consignee

    16
    inventory audit procedures
    Consider the
    effects of sales
    and purchases
    cutoff tests on
    inventories. 17
    inventory audit procedures
    For manufactured
    inventories:
    test the cost accounting
    system as it affects
    valuation of ending
    inventories and COGS
    18
    Illustration inventory cut off
    test
    SOLUTION Magdalena Company pg. 140

    Adjustments to inventory count:

    GOODS shipped by supplier June 24, recvd. July 6


    FOB shipping point 38,000
    GOODS shipped by supplier June 28, recvd. July 5
    FOB shipping point 20,000
    Segregated goods, stock items(100,000x70%)/x75% 52,500
    Freight relating to unsold goods (9,600x40%) 3,840
    Total adjustment 114,340

    19
    AJE
    a. AP 45,000
    PURCHASES 45,000
    b. PURCHASES 113,000
    113,000
    SALES 70,000
    AR 70,000
    C FREIGHT IN 9,600
    AP 9,600
    D. INVENTORY 114,340
    INCOME SUMMARY 114,340

    20
    COST OF SALES

    INVENTORY, JULY 1, 2014 900,000


    PURCHASES 8,488,000
    FREIGHT IN 91,600
    GOODS AVAILABLE FOR SALE 9,479,600
    END, INVENTORY 804,340
    COST OF SALES 8,675,260

    21

    You might also like

    pFad - Phonifier reborn

    Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

    Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


    Alternative Proxies:

    Alternative Proxy

    pFad Proxy

    pFad v3 Proxy

    pFad v4 Proxy