Chapter 9: SP - Inventory Flashcards
1
Q
Existence
A
Auditor performs physical verification to confirm existence of inventory
2
Q
Classification (2)
`
A
- Scan ledger (purchase transactions + manufacturing expenses only)
- Cutt off on sale/purchase
3
Q
Presentation
A
As per diclosure requirements of IAS 2
4
Q
Completeness (3)
A
- Obtain stock sheets and agree the total with financial statements.
- Include inventory held by 3rd party owned by entity.
- Physical verification (floor to list)
5
Q
Rights and obligations (2)
A
- Exclude inventory of 3rd parties
- Supplier invoice
6
Q
Valuation and Allocation: Cost > Raw Material (3)
A
- Check purchase price (compare amount on books with invoices)
- Check costing method (consistent with IFRS, industry and prior year?)
- Check if costing is done correctly**
7
Q
Valuation and Allocation: Cost > WIP/FG (6)
A
Obtain schedule showing breakup of each item
- Material:
1. Correct quantity
2. Inspect cost in purchase invoices
- Labor:
1. inspect hours with timesheet
2. inspect hourly rates with workers’ records - Production Overheads:
1. only POH not other OH
2. Confirm OH are absorbed on normal production levels**
Additionally, auditor will have to check stage of completion of work in process for Inventory, as well as Conversion Cost.
8
Q
Valuation and Allocation: Net Realizable Value (6)
A
- Review management’s procedures (when comparing costs w.NRV)
- Discuss reason for increase in inventory or decrease in sales
- Check sales return and credit notes
- Physical condition
- Recalculate NRV and check reasonableness of their assumptions. (with subequent sale price)
- Inspect aging report and review evidence for obsolete inventory