Scribd Logo
Upload

Welcome to Scribd!

  • 9 views

    AUDIT

    Uploaded by

    Jana Rao
    Auditors verify the accuracy of inventory records through several procedures: 1) They observe physical inventory counts to understand counting procedures and identify potential errors. 2) They perform independent test counts and compare results to company inventory records to validate inventory quantities. 3) They test that inventory items are correctly priced and totals are accurately compiled in the financial statements.

    Copyright:

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

    AUDIT

    Uploaded by

    Jana Rao
    9 views2 pages
    Auditors verify the accuracy of inventory records through several procedures: 1) They observe physical inventory counts to understand counting procedures and identify potential errors. 2) They perform independent test counts and compare results to company inventory records to validate inventory quantities. 3) They test that inventory items are correctly priced and totals are accurately compiled in the financial statements.

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Auditors verify the accuracy of inventory records through several procedures: 1) They observe physical inventory counts to understand counting procedures and identify potential errors. 2) They perform independent test counts and compare results to company inventory records to validate inventory quantities. 3) They test that inventory items are correctly priced and totals are accurately compiled in the financial statements.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    9 views2 pages

    AUDIT

    Uploaded by

    Jana Rao
    Auditors verify the accuracy of inventory records through several procedures: 1) They observe physical inventory counts to understand counting procedures and identify potential errors. 2) They perform independent test counts and compare results to company inventory records to validate inventory quantities. 3) They test that inventory items are correctly priced and totals are accurately compiled in the financial statements.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

     Ship goods and records revenue and cost

    Tracking shipments and associated expenses in the course of auditing the sales and
    collection cycle, auditors learn about and put to the test internal controls over recording
    shipments, including steps to ensure the accuracy of the credits to inventory recorded in
    perpetual inventory master files. Auditors will review the bill of materials for a selection of
    finished goods for accurancy and completeness. Finished goods analysis is an inventory audit
    procedure commonly used in production or manufacturing. It counts inventory when we
    finish a product rather than taking an inventory of the individual parts. Shipping invoice
    matching compares the overall cost of shipping goods with the number of items shipped.
    This helps to determine that we’re shipping the goods for the correct amount of money. We
    can perform this audit at random to help ensure that the costs stay consistent. In essence,
    all goods are accounted for and given a distinct value upon completion to guarantee the
    financial statements are accurate.

     Physical observe inventory

    Physical count are wall-to-wall inventory checks that account for all items. The best
    way for auditors to verify existence of assets is to take part in the physical inventory count.
    Auditors should first observe a company inventory count inventory count if at all possible.
    This is an excellent opportunity to understand the count procedure and become aware of
    any possible errors in their method. In addition to observing a count, auditors should
    perform their own independent count. Auditors can count just a portion of inventory and
    extrapolate results to the entire population. Physical count typically performed once a year
    at the company’s financial statement period-end. These are the inventory counts that will be
    subjected to external audit if required or desired by the company. As mentioned above,
    auditors will obrserve either the in-house team ot third party that is counting the inventory,
    to ensure they are comfortable with the procedures in place. The auditors will then do
    random test counts to validate the numbers. Then, we can compare the amount of
    inventory to the expected numbers in the company’s database or inventory system. This
    method is one of the more common ways to track inventory because it allows to quickly
    identify when to order new supplies. A physical counts are regularly repeated sequence of
    checks that focus on select amount or subset of the total inventory. For that reason, physical
    counts can provide an ongoing measurement of inventory accuracy and procedure
    execution.
     Price and compile inventory

    Auditors must verify that the physical counts of inventory are correctly priced and
    compiled. Inventory price tests include tests of the client’s unit prices to determine whether
    they are correct. Adequate control for unit cost is needed to make sure company is valuating
    ending inventory properly. Standard cost records that indicate variances in material, labor
    and overhead costs are helpful to evaluate the reasonableness of production records.
    Management should also have someone independent of the department responsible for
    determining the costs review them for reasonableness. Auditors must verify that the
    physical counts of inventory are correctly priced and compiled. Inventory compilation tests
    include testing the client’s summarization of the inventory counts, recalculating price times
    quantity, footing the inventory summary and tracing that totals to the general ledger. The
    most important internal control for accurate unit costs, extensions, and footings is internal
    verification by a competent, independent person who relies on adequate documents and
    records that were used for taking the physical count.

    You might also like