- 15 Marks
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)
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