Audit Checklist for performing Inventory audit in course of statutory audit of companies
Here is the guide to conduct Inventory audit in course of conducting statutory audit of a Company as per applicable Accounting Standards and other rules.
- Inventory Valuation workings for FIFO Valuation of materials and Finished Goods along with an Inventory Ageing is to be provided.
- Schedule inventory along with working for provision for non moving stock as per the company policy.
- Confirmation to be made available from all subcontractors/ C&F agent for stock with them.
- Schedule for Inventory at customs bonded warehouse along with the confirmation from the C&F agent for the same. The information should include item name, make, supplier, invoice no, invoice date, invoice amount, bond details etc.
- Details of in-transit inventory stock and its valuation. Invoice wise details to be provided along with subsequent receipt dates. The details to be as per intercompany reconciliation.
- Listing of major items inwarded for the period March 25, 20XX to March 31, 20XX as per the security register along with the corresponding GRN number and date.
- Schedule of GDNI inventory together with subsequent clearing status.
- Listing of items inwarded for the period April 01, 20XX to April 10th, 20XX as per the security register along with the corresponding GRN numbers and date.
After obtaining the documents and information, cross verification should be performed to arrive at Provision required, Closing stock and Cut offs.
These were some of the points which are applicable to ensure a true and fare position of Inventories as reflected in financial statements.
Based on situation, other methods should be applied.
Audit Procedures and checklist has to be designed based on the nature of industry and organisation, size of business and many such factors.
However, as per our auditing standards we have to ensure to achieve the following objectives.
Specific Audit Objective
1. Inventory reflectd in Balance sheet physically exists and includes all inventories , Materials-in-transit, consignment stock, Stock with third parties
2. The entity has legal ownership of the inventory
3. USe & movement of Stock is correctly recorded wrt to Account, Amount & Period to which it relates.
4. Obsolete , Non-moving and excess stock are identified and Provision is made for the same
5. Inventory counting procedures and policies are adequate
6. Cost is properly recorded as per the method of valuation & Inventory is taken at lower of Cost and Net realizable value
7. Inventory is properly classified and all disclosures are properly shown
Each of those objectives can be achieved using a set of Substantive procedures and few of such procedures are covered by Pulkit. It would be nice if some other articled trainees comment their views on this topic