Chapter 9: SP - Inventory Flashcards

1
Q

Existence

A

Auditor performs physical verification to confirm existence of inventory

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2
Q

Classification (2)

`

A
  1. Scan ledger (purchase transactions + manufacturing expenses only)
  2. Cutt off on sale/purchase
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3
Q

Presentation

A

As per diclosure requirements of IAS 2

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4
Q

Completeness (3)

A
  1. Obtain stock sheets and agree the total with financial statements.
  2. Include inventory held by 3rd party owned by entity.
  3. Physical verification (floor to list)
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5
Q

Rights and obligations (2)

A
  • Exclude inventory of 3rd parties
  • Supplier invoice
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6
Q

Valuation and Allocation: Cost > Raw Material (3)

A
  1. Check purchase price (compare amount on books with invoices)
  2. Check costing method (consistent with IFRS, industry and prior year?)
  3. Check if costing is done correctly**
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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.

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8
Q

Valuation and Allocation: Net Realizable Value (6)

A
  1. Review management’s procedures (when comparing costs w.NRV)
  2. Discuss reason for increase in inventory or decrease in sales
  3. Check sales return and credit notes
  4. Physical condition
  5. Recalculate NRV and check reasonableness of their assumptions. (with subequent sale price)
  6. Inspect aging report and review evidence for obsolete inventory
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