Question

What assumptions or conclusions are needed in order for an auditor to justify performing rollforward procedures (i.e., interim tests) on a balance sheet account?

Answer 1

Auditing plays an important roll in any organization. Auditor must be all rounder and made there efforts to perform well in all the area`s where they perform and wants to be audited by analysis the need, requirement according to organization objective.

Performing rollforward procedures:

It is the process of using the counting of inventory, sales, figures, and the purchases of inventoryin order to determined balance at the end of inventory. once this determined that balance is compared with the inventory balance given by the company. Both balances must be talled and if any discrepencies noted that must be investgated.

Role forward procedure are used when acceptable level of risk are high and level of control risk are low . This means that client has efficent and effective role , which leads to interim testing ,several month before end of the year in order to gain assurance up to the level.

The auditor performs analytical procedure and various details of transaction to transaction in the remaining month.

- If any company control over annual inventory then it is considered as good internal control

- It is to be suggested that company should complete physical count of all of its inventory atleast once in a year for control purpose.

- Counting of inventory can be done in two ways ;

1) Counting all the inventory at the end of fiscal year

2) By doing cycle counting ,companies counts part of their inventory at different times depend on product or location

Auditor time to time observe the begginng inventory and makes selection from the listing of inventory which are supposed to be in house.

As items are selected the auditor will count them, and the comparison is made with the balance of inventory given the company.

It is the duty of the auditor to count the inventory physically and does not rely on the clients record or any third party evidence.

If the inventory stock a large part of the business than auditor should follow generally accepted auditing standards for the accuracy , timely, efficiently purposse of the organization and should be reported with due care and facts must be stated in the report with pitfalls in the system and suggestion provided.