Physical Inventory Count

Question 1

What is a particular technique to verify quantity and conditions of inventories?

Answer 1

For auditor to attend the client’s inventory count

Question 2

Why are physical inventory count procedures vital?

Answer 2

They provide evidence which cannot be obtained elsewhere or at any other time about quantites and conditions of inventories and work-in-progress

Question 3

What does ISA 501 state?

Answer 3

Where inventory is materialm auditors shall obtain sufficient appropriate audit evidence regarding its existence and condition by attending the physical inventory counts

Question 4

Process for ISA 501 Step 1 (instruction and procedures)

Answer 4

Evaluate management’s instructions and procedures for recording and controlling the result of the physical inventory count

Question 5

Process for ISA 501 Step 2 (count procedures)

Answer 5

Observe performance of the count procedures

Question 6

Process for ISA 501 Step 3 (inventory)

Answer 6

Inspect the inventory

Question 7

Process for ISA 501 Step 4 (Perform test counts)

Answer 7

Perform test results

Question 8

Process for ISA 501 Step 5 (Audit procedures)

Answer 8

Perform audit procedires over entity’s final inventory records to determine whether they accurately reflect the count results

Question 9

What can attendance of inventory count serve as?

Answer 9

Substantive procedures or tests of controls