CH 18
CH 18
CH 18
Audit of the
Inventory and
Warehousing
CycleCopyright 2003 Pearson Education Canada Inc. 18 - 1
What is the sequence of functions in the
perpetual inventory
description $$
6/1/04-dry #4
solvent-200 kgs.7680
WAREHOUSE PRODUCTION
DEPARTMENT
WAREHOUSE PRODUCTION
DEPARTMENT
- existence
- existence
ABC Electronics Co.
- existence
- rights
- accuracy
Copyright 2003 Pearson Education Canada Inc. 18 - 13
What are the primary audit
objectives with regard to inventory?
- existence
- rights
- accuracy
- realizable value
Copyright 2003 Pearson Education Canada Inc. 18 - 14
What is the primary audit procedure
with regard to inventory?
why?
Copyright 2003 Pearson Education Canada Inc. 18 - 21
Some clients use
statistical sampling in their
inventory methods.
reduces
the need to count
every inventory item
(sample results can be
statistically extended
to the population)
Copyright 2003 Pearson Education Canada Inc. 18 - 22
Some clients use
statistical sampling in their
inventory methods.
January
how?
Copyright 2003 Pearson Education Canada Inc. 18 - 27
When the auditing firm has not audited
beginning balances, the auditors must
satisfy themselves as to the appropri-
ateness of beginning balances, if they
are satisfied as to the current balances.
how?
analytical review of prior tests of inventory
inventory transactions and
procedures documents
count records
Copyright 2003 Pearson Education Canada Inc. 18 - 28
How should the auditor test
inventory held at a public
warehouse?
client head-
quarters &
auditors
office
public
warehouse
Are additional
procedures
necessary?
Copyright 2003 Pearson Education Canada Inc. 18 - 30
How should the auditor test inventory
held at a public warehouse?
- direct written confirmation with the
public warehouse
perform
analytical
procedures
to test inventory
reasonableness
consignments R us
ACE