Inventory

Question 1

Inventory Audit risks and procedures

Answer 1

Audit risk:

• overstatement of invenetories
• slow moving stock not recognised
• translation errors
• failure to write down damaged goods
• deliberate overstatements
• failure to account for returns in correct accounting period

procedures

• obtain list of slow moving stock
• be present at period or year end inventory account
• obtain count procedure manual ensure reasonable i.e two counters, process managed by senior member of staff
• ensure NRV less than carrying value by obtaining and reviewing post year end invoices
• check inventory balances agree to opening balances and balances in financial statements
• perform test count
• obtain list of last goods received and delivered
• obtain written representation regarding any provisions necessary
• agree any returns to inventory records