The audit of inventory can be one of the most complex and time-consuming parts of an audit. A client's inventory asset may be comprised of thousands of different items, possibly stored in multiple locations, with potentially low-quality inventory records and associated valuations that are difficult to prove. How to Audit Inventory describes the characteristics of inventory from an auditing perspective and explains the activities required to audit this key asset. Particular attention is given to inventory counts and inventory valuation.
Upon successful completion of this course, participants will be able to:
- Recall the classifications used for inventory.
- Note the characteristics of the different types of inventory fraud.
- Describe the situations in which inventory errors can lead to material misstatements.
- Describe the substantive procedures used by an auditor to audit inventory.
- Recognize the items to be reviewed as part of an inventory test count.
- Note the actions to be taken when testing inventory costs.
- Describe compilation testing.
- Cite the circumstances under which a physical inventory count can be avoided.
- Recall the details of the lower of cost or market rule.
- Note the advantages of the various inventory costing methods.
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