Question

Data Analytics Accounting

Describe the challenge faced in auditing inventory during the coronavirus pandemic. Describe the possible solutions to this challenge.

Answer 1

The COVID-19 outbreak could create a number of
potential challenges for management of a company to
conduct, and an auditor to attend inventory counts. It is possible that the outbreak may make inventory count challenging, in some cases, impracticable and including attendance by auditors. This may involve companies to re-visit their inventory count strategy and have a discussion with the audit committee, those charged with governance.An auditor would need to consider whether roll-forward procedures could provide sufficient appropriate audit evidence.Generally, as the length of the roll-forward period increases, the persuasiveness of the audit evidence the previous inventory count combined with roll-forward procedures provides for existence of physical inventory quantities at the reporting date decreases. This is because an auditor can only sample transactions that were recorded during the roll-forward period, and there is a risk that inventory movements may not have been recorded. This risk increases as the roll-forward period gets longer. In addition, roll-forward procedures do not provide evidence as to the condition of inventory at the reporting date.
Use of technology in inventory count
In certain situations where physical attendance by
auditors is not possible, they may be able to observe
the count remotely via video call with the help of
technology. An auditor would need to ensure the
security on these applications. The auditors would
need to understand the technological and practical
constraints to observing an inventory count remotely.
If auditors are observing a count remotely, they would
need to perform the same procedures as if attending in person.