Question

You are part of the team assigned to a physical count of products held at your client’s site. They have two warehouse buildings with inventory and thousands of line items, and a large area where trucks are loaded and unloaded. When you arrive with the team in the morning of your test counting, you notice maybe 25 or so unattended truck trailers parked at the back of the lot. Walking the property you see that the trucks are closed and most have padlocks on them. Your audit test instructions made no mention of any trucks being at the client’s location. What do you do?    

Answer 1

When an audit of physical count of goods takes place, all the locations like warehouse, factory, etc. wherever the goods are kept are to be covered. In the case above, it is mentioned that there is a large area where the trucks are loaded and unloaded, i.e. from there is incoming and outgoing of goods. During the date of physical verification of goods, all the activities like loading, unloading, manufacturing, etc. should be stopped so that there is accuracy and completeness of audit. When something unusual is observed, the audit team needs to enquire about it. In this case, 25 unattended trucks were sighted at client's site and there is no mention about the same in audi test instructions so we need to enquire the following -

a) if the trucks are property of the client or they are leased,

b) whether the trucks are empty or loaded with goods,

c) whether there are goods in the truck that needs to be included in the inventory or they belong to third parties,

d) to find out the reason for parking the trucks at the back of the lot,

e) to find out if the goods in the truck, if any, is the property of the client, etc.

After the enquiries are completed, the team will evaluate its audit test controls if they are adequate and efficient and if necessary perform additional audit procedures to ensure the accuracy, correctness and completeness of audit.