Question

In the audit of inventory the auditor must perform important procedures prior to the actual observation. Identify the steps the auditor must take prior to the day the inventory is actually counted.

Answer 1

As per Standard of auditing 501- Audit evidence - specific consideration for selected item, In case where inventory is material to the financial statement,the auditor shall obtain suffucient and appropriate audit evidences regarding existance and condition by performing general procedure

a) Attendence at physical inventory counting unless impracticalable to:

- Evaluate managment instructions and procedures for recording and controlling the results of the entity's physical inventory count

- Observe the performance of management's ciunt procedure

- Inspect the inventory

- Perform test count