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Substantive Procedures

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9 views

Substantive Procedures

Uploaded by

sabinkumar420
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Substantive procedures

Inventory valuation

1)Discuss the basis of WIP valuation with the management.

2)Assess the NRV from the sample of product that has been sold post year end.

3)Vouch a sample of inventory items with supplier’s invoices.

4)Confirm the cost of the inventory with supporting documentation to confirm cost of labor, cost of raw
materials and cost of overheads.

5)Obtain the list of slow moving and aged inventory and identify if they should have been written off.

Before the inventory count

1)Obtain the photocopy of the inventory count instructions and procedures from the client to
understand how the count will be undertaken and assess the effectiveness of the count procedure.

2)Calculate the materiality of each warehouse and determine which one to visit during audit by
reference of calculated materiality level.

3)Review the prior year audit file and identify if any of the warehouse had significant issue arising during
the audit.

4)Consider the need for the use of expert in assisting the valuation of the inventory.

5)Ascertain if any of the inventory is held by third parties and if possible determine how to gather
appropriate sufficient evidence.

During the inventory counts

1)Observe whether the staff of the organization are following the inventory count instructions to ensure
the counts are complete and accurate.

2)Perform the test count of inventory to ensure internal controls and procedures are in place and to
gain evidence over the existence and completeness of the count.

3)Obtain the completed sequentially numbered inventory sheets for the final testing during the final
audit.

4)Observe the procedures of the inventory movements during the count of the inventory to ensure that
no items are counted twice or has been omitted from the count.

5)Ascertain inventories held in behalf of third parties are separately identified and are not included in
the count of the inventory.

After the inventory count

1)Trace the items that were test counted to the final inventory sheets.

2)Inspect inventory sheets to ensure that sheets are supported by the count records.
3)Cast the inventory listing to ensure the accuracy of the inventory count of the client.

4)Confirm the cut-off by the details of the last serial number of goods inward and outward notes and
details of movements during the count.

5)Ensure continuous inventory records have been adjusted to amount physically counted and that
difference has been investigated.

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