Audit Procedures for Inventory (1)

Question 1

Completeness (inventory listing)

Answer 1

Trace test counts to the detailed inventory listing

Question 2

Completeness (physically inspect)

Answer 2

Where inventory is held in third-party locations, physically inspect this inventory

Question 3

Completeness (review confirmations)

Answer 3

Where inventory is held in third-party locations, review confirmations from third party and match to the general ledger

Question 4

Completeness (gross profit percentage)

Answer 4

Compare gross profit percentage to previous uear or industry daya and investigate any unexpected variations

Question 5

Existence (count)

Answer 5

Observe the physiucal inventory count

Question 6

Rights and obligations (inventory held)

Answer 6

Verify any inventory held for third parties is not included in year-end inventory figure by being appropriately segragated during the inventory count

Question 7

Rights and obligation (bill and hold)

Answer 7

For any bill and hold inventory, identify such inventory and ensure that it is segragated during inventory count so it is not included in year-end inventory figure

Question 8

What is bill and hold inventory?

Answer 8

Inventory has been sold but is being held by the entity until customer requires it

Question 9

Rights and obligation (inventory listing)

Answer 9

Confirm any inventory held at third-party locations is included in year-end inventory figure by reviewing the inventory listing