Inventory Testing

Question 1

Inventory included at the balance sheet physically existed

Answer 1

Existence

Observe Physical Count

Question 2

Pledge or Assignment of inventory is appropriately disclosed

Answer 2

Classification and Understanability

Obtain confirmation of inventories

Question 3

Entity has legal title

Answer 3

Rights & Obligations

Examine vendor invoices, agreements, contracts

Question 4

Inventory are reduced to NRV when appropriate

Answer 4

Valuation & Allocation

Obtain current market value Quotes

Question 5

Inventory listing are accurately compiled and totals are properly included in accounts

Answer 5

Completeness

Trace test counts recorded during physical inventory observation to inventory listing

Question 6

Inventory quantities include all products on hand

Answer 6

Completeness

Observe physical inventory counts

Question 7

Inventories are properly stated at Costs (Cost does not exceed Market value)

Answer 7

Valuation and allocation

Examine paid vendor invoices, agreements, contracts

Question 8

Obsolete items included in inventory are properly identified

Answer 8

Valuation and allocation

Examine an analysis of inventory turnover

Question 9

Inventory quantities include all products stored at outside locations

Answer 9

Completeness

Obtain confirmation of inventories

Question 10

Inventories represent items held for sale or use in the normal course of business

Answer 10

Existence

Compare inventory with current sales catalog