Question

Exam Question: Silver hill


Your firm is the auditor of Silverhill Potteries, which is a wholesaler of pottery products (eg cups, saucers, plates, mugs etc), and you are carrying out the audit for the year ended 30 April.

You have been asked by the senior in charge of the audit the audit to carry out checks on cut-off and to identify stock which may be worth less than cost and to check that it has been valued correctly.

The company has a computerised inventory control system which records receipts and dispatches of stock, current stock quantities and the age of the stock.   You attend a count of all the stock at the year end.

 You are required:

(a) To explain the procedures you would perform to confirm that inventory, sales and purchases cut-off is accurate.

(b) Define in detail the basis for valuing inventory in accordance with International Financial Reporting Standards.

(c) (i) State the types of stock which may be worth less than cost;

(ii) Describe the investigations you will carry out to identify this stock;  

(iii) Describe the audit work you will carrying out to determine the net realisable value of the stock you have found from your investigations in part (c) (ii) above.

Answer 1