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Topic 13: Fieldwork Inventory and Warehousing Cycle

Audit Topics. . Planning. Fieldwork. Audit Completion. Through All Audit Phases. Topic 1: OverviewTopic 2: Accounting Information SystemTopic 18: Legal Liability Fraud Detection IT AuditingOther Engagements

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Topic 13: Fieldwork Inventory and Warehousing Cycle

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    1. Topic 13: Fieldwork ? Inventory and Warehousing Cycle BMGT 422 - Auditing Arens 12e Ch. 21 James J. McKinney jmckinney@rhsmith.umd.edu

    5. Cycle Overview

    8. Warehouse Layouts

    9. Physical Observation – Procedures Performed by Client Typically Y/E observation required by GAAS: If on perpetual system and IC good then could do small counts through year. If JIT inventory might be immaterial. Inventory Tags should be used. Counter tells recorder quantity. Recorder fills out card. Tears in half leaving one in the bin and the other is taken to the data entry person. All large differences between previous perpetual and new one are investigated. All tags S/B accounted for. (Make sure nothing is missed - for completeness). Warehouse S/B in order: labeled bins and marked off areas. All new receipts S/B segregated. All outgoing shipments S/B specially handled.

    10. Physical Observation – Procedures Performed by Auditor Select a sample of inventory: 1) Random selection of Tags 2) Random selection of Invoice Amounts &/or 3) Judgmental or nonstatistical selection Reperform count (make sure they do not know your selection). Compare quantity to tag in bin. Compare your count to count on final inventory listing. Make sure large differences are investigated. They should be the same. To test IC, you observe client personnel count. No additional cost to the auditor. Make sure orderly count. Make sure numerical sequence is complete. Look for damaged, obsolete, or slow moving inventory. Test for completeness by blanks for quantity and filled in tags at all bins.

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