Final visit inventory

1. 1
AUDIT PROGRAMME
INVENTORY
Name of Client Sheridan AV
Year-end March 31, 2021
Name of Auditor (s) Aljuantone B. Consigna
Seth Harvey M. Hendeve
INVENTORY
Inventory is shown as a current asset on the Statement of Financial Position. It is valued at
the lower of cost or net realisable value. Inventory can be shown as goods bought for resale
(merchandising company) or in one of three stages for a manufacturing company:
 Raw materials
 Work in process
 Finished goods
Substantive testing should be carried out at year end on the Statement of Financial Position
to gain evidence regarding the following assertions:
 Presentation and disclosure
 Accuracy classification and valuation
 Rights and Obligations
 Completeness and cut off
 Existence or Occurrence
The following substantive tests were carried out on the inventory showing on the Statement
of Financial Position (see attached)

2. 2
Audit Assertion Audit objective Test(s) to be carried out Details of testing Date and
signature
Presentation
and Disclosure
Inventory is
properly
identified and
classified in the
financial
statements
Disclosures
pertainingto the
classification,
basis of valuation
and the pledging
of inventories are
adequate
Trace opening inventory
records to prior year’s
working papers
Perform analytical
review and review
industry experience and
trends.
Examine an analysisof
inventory turnover and
gross profit
Compare report
presentation with
applicableaccounting
standards
Review disclosures for
inventories in drafts of
financial statements and
determine conformity
with applicable
accountingstandards.
Inventory records of raw
materials,finished goods,
store room and the shop
and demonstration room
showed the improper stock
code arrangement. Base on
the inventory collation of
raw materials,there are
other added stocks which
are not listed in either the
warehouse or the store
room. On the inventory
collation of finished goods,
stock codes are not properly
arranged and the unit
counts are different from
the total number of counts
in the recorded finished
goods in both warehouse
and store room. Moreover,
the memos on the damaged
stock reports are priced
baseon its salvagevalue.
It would be wise if during
the inventory count printed,
prices of each item and the
total cost of each item are
also stated in the report so
duringthe examination it
would be a loteasier.
Septerm
ber 16,
2020
Accuracy,
classification
and valuation
Rights and
Obligations
Inventories are
properly stated at
the lower of cost
or net realisable
value,determined
in accordance
with applicable
accounting
standards
Actual – agree prices to
purchaseinvoices on
costingrecords
Sellingpriceless mark up
– (a) agree a selection of
items to current price
lists and also prices
noted at the inventory
attendance and (b)
consider whether the
gross margin used to
reduce sellingpriceto
costis reasonableand
has been correctly
applied
Perform a lower of cost
or net realisablevalue
test (see supplementary
sheet)
Base on the supplementary
sheet, the accuracy of the
inventory count is above
average due to the
inventory count officer
which is also thedistribution
manager of the warehouse.
In regards with this,the
count might prove to be less
reliabledueto the
connections of the count
officer with the warehouse
and store room.
Septerm
ber 16,
2020

3. 3
Completeness
and Cut off
Inventories
includeall
materials,
products and
supplies atthe
Statement of
Financial Position
date
CUT OFF
Review the results of the
test on cut-off carried
out on receivables and
payables and ensurethat
they provide adequate
assuranceas to the
accuracy of the year end
cut-off
Enquire if any inventory
is held on behalf of third
parties and ensure that
such items are excluded
from inventory. Where
material,obtain
confirmation from the
third party.
Where inventory is held
by third parties on behalf
of the company, obtain
certificates where
amounts arematerial.
Base on the cut off carried
out on the receivables and
payables,the inventory
count provided adequate
assuranceto the accuracy of
the year end cut-off
There is no such inventory
held on the behalf of the
third parties.
Septerm
ber 16,
2020
Existence or
Occurrence
Inventories
included in the
Statement of
Financial Position
physically exist
Complete the inventory
attendance programme
(see supplementary
sheet)
Trace all items selected
at the inventory count to
the final inventory
sheets. Obtain
explanations for any
differences
The inventory attendance
programme is done and
completed baseon the
supplementary sheet.
Inventories with item code
that starts with X0 in raw
materials aresuspected to
be items left in the
production room which are
work in process.Since the
production has been closed
sinceMarch 30,2021.
Inventory items that have
codes startingfrom E11,
F02, G03, H01 (except for
H019), J007, and K02 are
suspected to be delivered
but not yet paid in full which
are listed in the inventory
collation of finished goods.
Septerm
ber 16,
2020
From the audit work carried out I confirm that (*subject to the matters highlighted below) in
my opinion, inventories are fairly stated.
Signed
SETH HARVEY M. HENDEVE
ALJUANTONE B. CONSIGNA
AUDITOR

4. 4
SUPPLEMENTARY SHEET
LOWER OR COST OR NET REALISABLE VALUE TEST
For items priced at net realisable value, the auditors must verify the basis for arriving at that
value(it should be actual selling price less an estimate of costs to be incurred in completion
and selling)
IAS 2 identifies the following situations when a write-down may be necessary: a fall in selling
prices; physical deterioration of inventories; obsolescence; a decision to sell at a loss or
purchasing or production errors.
TESTS THAT CAN BE CARRIED OUT
1. Review sales after date of Statement of Financial Position
2. Observe for signs of obsolescence during attendance at inventory count
3. Analyse amount of inventory held in relation to budgeted turnover to identify any
excessive holdings.
4. Enquire of management and of sales and production personnel
5. Review minutes of boards of directors and executive committees

5. 5
Client SheridanAV___________________________________________________
Year End March 31,2021_____________________________________________
AUDIT PROGRAMME – INVENTORY COUNT ATTENDANCE
NOTES INITIALS AND
DATE
GENERAL
1 Record the following details for
each location visited:
(a) location(s) being counted
(b) date(s) of count and attendance
(c) types of inventory held at
location
(d) approximate value of inventory
by category and location
(e) Details of any inventory at
locations not covered by the count
and any alternative method used
to verify their existence
(f) brief description of the
procedures adopted
(g) names of client staff counting
(h) names of audit staff taking part
(a) Warehouse zones 1 to 7,
Production area and Store room
(b) March 31,2021,
Peter Fillion - warehouse
manager/ distribution manager
Rob Cole – Warehouse/
distribution assistant
Dan Sheppard – Retail Shop
assistant
(c) Raw materials and finished
goods
(d) Raw materials Warehouse-
66,309
Raw materials Store Room –
19,989.20
Finished Goods Warehouse –
258,064
Finished Goods Store Room and
Demo Room –
9,192
(e) Inventories with item code
that starts with X0 in raw
materials are suspected to be
items left in the production
room which are work in process.
Since the production has been
closed since March 30,2021.
Inventory items that have codes
starting from E11, F02, G03, H01
(except for H019), J007, and K02
are suspected to be delivered
but not yet paid in full which are
listed in the inventory collation
of finished goods.
(f) Physical counting of inventory
which requires a counting officer
to perform such tasks.
(g) Peter Fillion - warehouse
manager/ distribution manager
Septermber 16,
2020

6. 6
Rob Cole – Warehouse/
distribution assistant
Dan Sheppard – Retail Shop
assistant
(h) Graeme Moore
Seth Harvey M. Hendeve
2 Ascertain and note whether:
(a) the inventory count teams were
properly briefed prior to
commencing the count;
(b) the teams only include people
who are not responsible for the
storing and recording of inventory
and work in progress;
(c) inventory was counted by
teams of two (one counting and
one checking and recording);
(d) the teams were asked to
identify damaged, slow moving or
obsolete stock;
(e) the teams were made aware of
inventory held on behalf of third
parties and these were excluded
from the count
(a) It is ascertained by Graeme
Moore base on the video
provided
(b) the teams are composed of
the warehouse manager,
warehouse assistant, and retail
shop assistant which are
responsible for storing and
recording of inventory
(c) the teams on both the
warehouse and the store room
and demo room are done by
both one counting and one
checking and recording
(d) Yes
(e) Yes
Septermber 16,
2020
INVENTORY COUNTING
3 Determine whether:
(a) the teams were counting and
recording accurately
(b) the counts were being
controlled to ensure that all
inventory was counted and only
once;
(c) there was adequate control
over inventory sheets to ensure
that they are all accounted for (e.g.
pre-numbered)
4 Where serially numbered sheets
are used, record the numbers of all
sheets used at the end of the count
3. (a) all teams in both
warehouse and store room are
counting and are recording
accurately.
(b) yes
(c) yes
4. There were no serial numbers
presented on the numbered
sheets.
Septermber 16,
2020
5 Select a sample of items from
completed inventory sheets and
check to ensure that the number
has been recorded properly
A020 SheridanNexusNX-01–5.1
speakerset,have different
quantities countedandpresented
on the inventorycollation.
X034 Kevlarspeakercone –
tweeter,are notseenduringthe
inventorycountandisnot listed
but islisted onthe inventory
collationinraw materials
Septermber 16,
2020

7. 7
6 Count a sample of inventory
items and ensure that they have
been recorded properly on the
final inventory sheets
A020 SheridanNexusNX-01–5.1
speakerset,have different
quantitiescountedandpresented
on the inventorycollation.
7 Where possible, copy or extract
details of a sample of rough
inventory sheets for checking at
the final audit
Given already Septermber 16,
2020
8 Ascertain whether any inventory
is held on behalf of a third party.
Where applicable ensure that it has
been properly labelled and
excluded from the count
According to the video given by
Graeme Moore, it is said there
that there is no third-party
inventory held on the
warehouses and store room.
Septermber 16,
2020
9 Note any old or damaged
inventory during the count.
Ensure that it is marked as such on
the final inventory sheets.
Done Septermber 16,
2020
CUT OFF
10 Ensure that no movements in or
out took place during the inventory
count
11 Record details of the last goods
dispatch number and the last
goods received note number to
follow up at the final audit.
10. The shop was closed a day
before the inventory count and
the shop reopens after the day
of the inventory count.
11. D123 Phoenix –PBR-25– Blu-
ray player,February29, 2021
Septermber 16,
2020
CONCLUSION
12 Write a report on the inventory
count concluding on its accuracy
and the ability to be able to rely on
it.
12. Base on the accuracy of the
inventory count done on March
31,2021, it had been done with
proper counting and the only
issue is that the one accounted
to count the inventory is the
distribution manager or
assistants itself. This may prove
to be less reliable type of
counting due to the affiliations
of the distribution manager to
the inventory itself.
Septermber 16,
2020