How to Audit Inventory

2 Credits: Auditing


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How to Audit Inventory

Course Level
CPE Credits

2 Credits: Auditing

Course Description

This course clarifies for the auditor every action needed to audit inventory. It describes the characteristics of inventory from an auditing perspective, and then goes on to describe the steps required to audit inventory. Background information concerning inventory is also included, such as physical inventory counts, the lower of cost or market rule, and inventory cost layering.

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Learning Objectives

Upon successful completion of this course, participants will be able to:

  • Recall the classifications used for inventory.
  • Specify 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.
  • Specify the actions to be taken when testing inventory costs.
  • Describe compilation testing.
  • Identify the additional inventory audit steps used when a new client was not audited in the past year.
  • Cite the circumstances under which a physical inventory count can be avoided.
  • Recall the issues associated with a client using a separate count team to verify the counts made.
  • Recall the details of the lower of cost or market rule.
  • Specify the advantages of the various inventory costing methods.
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Course Specifics

Course ID
Revision Date
March 12, 2024

There are no prerequisites.

Advanced Preparation


Number of Pages

Compliance Information

NASBA Provider Number: 103220

CFP Notice: Not all courses that qualify for CFP® credit are registered by Western CPE. If a course does not have a CFP registration number in the compliance section, the continuing education will need to be individually reported with the CFP Board. For more information on the reporting process, required documentation, processing fee, etc., contact the CFP Board. CFP Professionals must take each course in it’s entirety, the CFP Board DOES NOT accept partial credits for courses.

Meet The Experts

Steven M. Bragg, CPA, is a full-time book and course author who has written more than 300 business books and courses. He provides Western CPE with self-study courses in the areas of accounting and finance, with an emphasis on the practical application of accounting standards and management techniques. A sampling of his courses include the The New Controller Guidebook, The GAAP Guidebook, Accountants’ Guidebook, and Closing the Books: An Accountant’s Guide. He also manages the Accounting Best Practices podcast. Steven has been the CFO or controller of both public and private companies and has been a consulting manager with Ernst & Young and …