Inventory Count – NBC Institute

AA – Nov 2015 – L2 – Q3a – Internal Control Systems

Discussing the auditor's duties before, during, and after an inventory count.

Question

You are the auditor of a Fast Food Company with many sales outlets. The company operates a central system of purchase and supply. The Goods Received Notes and Delivery Notes were not given utmost importance in the issuing and receiving of inventories. The suppliers’ ledger, stores’ ledger, and bin cards were not updated regularly. The outlet managers often complained of short supplies and shortages recorded against them regularly. Two of the outlet managers even complained directly to the Managing Director of the company concerning the shortages recently recorded against them. As a first step to solving the inherent weakness in the company’s inventory control process, management decided to undertake a physical inventory count.

Required:
a. Itemize the duties of the auditor in relation to inventories count under the following headings:
i. Before the count.
ii. During the count.
iii. After the count. (9 Marks)

Answer

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Tags: Audit evidence, Audit Procedures, Internal Control, Inventory Count
Level: Level 2

Topic: Internal Control Systems
Series: NOV 2015

AA – May 2022 – L2 – SC – Q5 – Audit of Public Sector Entities

Advise on physical inventory count procedures, records to retain, and how to value inventory items.

Question

Garkuwa Nigeria Limited is a newly incorporated company that deals in building materials. The Managing Director is engaged on a full-time basis in the running of the business. Other employees are: the accounts officer who keeps the books, the cashier, and two laborers. The company does not maintain inventory records, and inventory is a material item in the financial statements. The Managing Director wants you to advise him on inventory count procedures with a view to ensuring that the methods used at arriving at the inventory value will be satisfactory. The first financial statements of the company are to be made up for the 12 months to December 31, 2021.

a. Advise the Managing Director on how he should organize and carry out the physical inventory count. (9 Marks)
b. State the records and information he should retain in connection with the count. (3 Marks)
c. How should he arrive at the individual values for the various inventory items? (3 Marks)

Answer

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Tags: Internal Controls, Inventory Count, Physical Inventory, Valuation Procedures
Level: Level 2

Topic: Audit of Public Sector Entities
Series: MAY 2022

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

Question

Your firm is the external auditor of The Ceramicz Company, and you recently attended the year-end inventory count at the company’s warehouse. The company manufactures high-quality tableware (plates, cups, and saucers, etc.) and maintains an integrated computerised system that shows the inventory held at any point in time.

At the year-end inventory count, reports showing the various categories of inventories (but not the quantities) are printed off the system, and the quantities of inventories actually counted are inserted manually by the counters. Later, the quantities are compared with those per the computer system.

The count instructions were received by both you and the counters the day before the count was due to take place. The instructions consisted of the following five points:

Counters must arrive at 8 am on the morning of the count.
They will work in teams of two people.
Each team will be assigned a specific area of the warehouse to count. They will receive inventory sheets listing the products to be found in their area.
The inventory sheets are pre-numbered.
Once the counters have finished the inventory count, the inventory sheets must be handed to the warehouse manager.
Your notes from the attendance at the count include the following observations:

Many areas in which the count took place were untidy, and inventory was sometimes difficult to find because it was not in the allocated area. The same categories of inventories were sometimes found in several different areas, and some inventory was incorrectly labelled.
The count was conducted in a hurry in order to close the warehouse before a public holiday, and there were insufficient counters to conduct the count properly in the time available. The issue and receipt of inventory sheets (on which the quantities were recorded by counters) were not properly controlled. It was difficult to reconcile the inventory quantities recorded at the count to the computerised records, and some significant differences remain outstanding.
Although no finished goods were dispatched during the inventory count, a large delivery of raw materials was received into the warehouse.
Required:

a) For the inventory count conducted by the Ceramicz Company:
i. Identify and explain FOUR (4) deficiencies in the count.
ii. Explain the possible implication of each deficiency and
iii. Provide a recommendation to address each deficiency.
(12 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Deficiencies, Inventory Count, Recommendations
Level: Level 2

Topic: Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements
Series: NOV 2015

AA – Nov 2015 – L2 – Q3a – Internal Control Systems

Discussing the auditor's duties before, during, and after an inventory count.

Question

Required:
a. Itemize the duties of the auditor in relation to inventories count under the following headings:
i. Before the count.
ii. During the count.
iii. After the count. (9 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit evidence, Audit Procedures, Internal Control, Inventory Count
Level: Level 2

Topic: Internal Control Systems
Series: NOV 2015

AA – May 2022 – L2 – SC – Q5 – Audit of Public Sector Entities

Advise on physical inventory count procedures, records to retain, and how to value inventory items.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Internal Controls, Inventory Count, Physical Inventory, Valuation Procedures
Level: Level 2

Topic: Audit of Public Sector Entities
Series: MAY 2022

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

Question

The count instructions were received by both you and the counters the day before the count was due to take place. The instructions consisted of the following five points:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Deficiencies, Inventory Count, Recommendations
Level: Level 2

Topic: Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements
Series: NOV 2015

Question Tag: Inventory Count

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AA – Nov 2015 – L2 – Q3a – Internal Control Systems

Discussing the auditor's duties before, during, and after an inventory count.

AA – May 2022 – L2 – SC – Q5 – Audit of Public Sector Entities

Advise on physical inventory count procedures, records to retain, and how to value inventory items.

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

AA – Nov 2015 – L2 – Q3a – Internal Control Systems

Discussing the auditor's duties before, during, and after an inventory count.

AA – May 2022 – L2 – SC – Q5 – Audit of Public Sector Entities

Advise on physical inventory count procedures, records to retain, and how to value inventory items.

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

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AA – Nov 2015 – L2 – Q3a – Internal Control Systems

Discussing the auditor's duties before, during, and after an inventory count.

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AA – May 2022 – L2 – SC – Q5 – Audit of Public Sector Entities

Advise on physical inventory count procedures, records to retain, and how to value inventory items.

You're reporting an error for "AA – May 2022 – L2 – SC – Q5 – Audit of Public Sector Entities"

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

You're reporting an error for "AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements"

AA – Nov 2015 – L2 – Q3a – Internal Control Systems

Discussing the auditor's duties before, during, and after an inventory count.

You're reporting an error for "AA – Nov 2015 – L2 – Q3a – Internal Control Systems"

AA – May 2022 – L2 – SC – Q5 – Audit of Public Sector Entities

Advise on physical inventory count procedures, records to retain, and how to value inventory items.

You're reporting an error for "AA – May 2022 – L2 – SC – Q5 – Audit of Public Sector Entities"

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

You're reporting an error for "AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements"

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