Audit Procedures for Inventory (3)

Question 1

Accuracy, valuation and allocation (reconcile)

Answer 1

Reconcile labour hours to time summaries

Question 2

Accuracy, valuation and allocation (work in progress production management)

Answer 2

Where inventory relates to work in progress discuss the stage of completion with production management and recalculate inventory values. Consider whether an expert is required

Question 3

Accuracy, valuation and allocation (enquiries of management)

Answer 3

Make enquiries of management to ascertain any slow-moving or obsolete inventory that should be written down

Question 4

Accuracy, valuation and allocation (examine prices)

Answer 4

Examine prices at which finished goods have been sold after the year end to ascertain whether any finished goods need to be written down

Question 5

Accuracy, valuation and allocation (unsold period of time)

Answer 5

If significant levels of finished goods remain unsold for an unusual period of time, discuss with management and consider the need to make allowance

Question 6

Accuracy, valuation and allocation (gross profit)

Answer 6

Compare the gross profit percentage to previous year of industry data

Question 7

Accuracy, valuation and allocation (raw material)

Answer 7

Compare raw material, finished goods and inventory collection period to previous year and industry averages

Question 8

Accuracy, valuation and allocation (inventory period)

Answer 8

Compare inventory holding period with previous year and industry average