Page 101 - Auditinf Electronic System

7. Realizable value: Inventory items in the inventory listing are stated at
realizable value where obsolete and damaged goods are excluded
o Perform tests of lower of cost or market, selling price, and
obsolescence
o Test for obsolete inventory by inquiry of factory employees and
management and alertness for items that are damaged, rust or dust-
covered, or located in inappropriate places.

8. Detail tie-in: Inventory in the inventory listing schedule agrees with the
physical inventory counts, and the total is correctly added and agrees with the
general ledger
o Trace Totals of each inventory type to general ledger
In pricing raw materials in manufactured products, auditors must consider
both the unit cost of the raw materials and the number of units required to
manufacture a unit of output. The unit cost can be verified in the same manner
as that used for other purchased inventory, by examining vendors’ invoices or
perpetual inventory master files. Auditors must examine engineering
specifications, inspect the finished product, or find a similar method to
determine the number of units it takes to manufacture a product.

Similarly, while testing direct labor, auditors must verify the hourly costs of
direct labor and the number of hours it takes to manufacture a unit of output.
Hourly labor costs can be verified by examining labor payroll or union
contracts. Auditors can determine the number of hours needed to manufacture
the product from engineering specifications or similar sources.

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‫جميع الحقوق محفوظة ـ الإعتداء على حق المؤلف بالنسخ أو الطباعة يعرض فاعله للمسائلة القانونية‬