Question

Audit - audit procedures

After getting the lists and totals of inventory with market value or value-at-cost of greater than $10,000, what audit procedure would you complete next? What risk and management assertion are you addressing with your proposed audit procedure?

Answer 1

The verification of high value inventory includes:

1.Confirmation from the suppliers regarding the purchase of the items.

2. Tallying the inventory with the general ledger account

3. Check for the current market value and if the same is properly accounted for

4. Test for slow moving and obsolete items, ensure they are written off or provision is made for fall in value and all inventory items are properly classified.

5. Test the method of inventory used and check if it is appropriate

6. Physical counting of the inventory through observation and ensure existence of the inventory

The risk and management assertion that will be addressed is that the financial statements will not be totally free of material misstatement and the primarily responsibility of preparing and accurate data lies with the management. Also , the auditor relies on the management assertion that all transactions that have occurred in the period under consideration have been reported, accounted for and are complete.