Question

Observation of a client's inventory is a presumptively mandatory audit procedure.

Describe what happen if the test counts are not documented?

Answer 1

In the process of Observation of a client's inventory, the auditor need to document the test counts.

If the test counts are not documented, the auditor won't have a documented evidence to support the final inventory listing figures and test count figures in case there are any discrepencies in the final listing of the inventory values.

Test count documentation form part of Audit Working papers which can be used to prove the work undertaken by the auditor.

If such test counts are not documented and if there are any litigations arise in the future regarding the matter concerned, auditor won't have sufficient appropriate audit evidence to prove his innocence and his professional skill and due care during the audit he performed.

Hope this is helpful!!