Page 97 - Auditinf Electronic System

units at $12.00 per unit, and the
2. Observe the client’s counting immediately preceding acquisition was
procedure
for 600 units at $11.30 per unit. Using

3. Make inquiries of client correct FIFO valuation techniques, the
personnel about their counting inventory items should be included at
procedure $11,790 (700 units at $12 and 300 at

$11.30). The client’s calculations

4. Make their own independent overstates inventory by $210.00
tests of the physical count. ($12,000 – $11,790). Assuming the

5. Confirm with custodian of our client makes this
inventory held consignment in same error on many inventory items,
other locations
the misstatement amount can be
material.

Second: Designing tests of controls and substantive tests of

transactions for Inventory and warehouse

1. Understand internal control of:
a) controls over Physical count: controls ensure physical observation
requirements are met by the client
b) Controls over the related costs: consistency in using costing methods over
time, estimation of cost of obsolete inventory,

2. Assess planned controls risk

uses the information obtained in understanding internal control to assess
existing control determine any control deficiency and identify control risk. The
auditor has to assess effectiveness of key controls:

The key control activities Include

a. Physical controls over inventory: including proper client instructions for the
physical count, indicating timing of physical count.

b. independent reconciliations: of the physical counts with perpetual inventory
master files and independent internal verification of the counts by other client
personnel.

c. authorization of Physical count: ensure supervision by responsible company
personnel

d. Documentation: Documents and records for transferring inventory must be
prenumbered and stamped and properly stored including vendors invoice for
raw material

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