Inventory count checklist

Inventory count checklist D.110
Page 1 of 2
Entity
Period ended
AA = Assertions addressed and PSC = Procedure successfully completed.
AA
W/P
ref.
PSC
(Y/N)
(Initials)
Summarize exceptions
or difficulties encountered
1. Identify all locations where physical inventory is held.
Arrange to observe the inventory counts in locations
where material values of inventory exist. Consideration
could also be given to attending one or more other
locations on a surprise basis.
2. Obtain and review the entity’s inventory count
instructions. Check that the instructions contain
sufficient and appropriate procedures to ensure that:
a) An accurate physical inventory can be taken.
b) Control will be maintained over the movement of
inventory if production is not temporarily halted.
c) Inventory counts will be adequately supervised and
checked.
d) Inventory cannot be counted twice or missed from
the count.
EA
EA
A
A
A
e) Consignment inventory will be excluded. A
f) Inventory will be appropriately segregated and
organized to facilitate counts.
g) In-transit and warehoused inventories will be
included in the count.
A
C
If the count instructions are not adequate, discuss with
management and ensure appropriate revisions are made.
3. Take control of the counts from start to completion.
a) Record the numbers of inventory sheets, count tags
or cards used.
b) Account for sequence of numbers of pre-numbered
documents (e.g., used, voided and unused).
4. Inquire and observe what procedures management uses
to ensure the safeguarding of any inventory that is
subject to theft (i.e., small items with high dollar value)
or damage. Consider any fraud risk identified relating to
inventory (Form 522).
5. Observe the physical inventory count and make a
number of test counts. These test counts should include:
a) counts (for existence of inventory) from
what is recorded on the inventory listing to the
physical amounts (“sheet to floor”).
b) counts (for completeness of inventory) from
the physical amounts to the inventory list (“floor to
sheet”).
c) Ensure test count sizes are sufficient to obtain
coverage of all significant inventory components.
d) Where errors are found, have management correct
the errors and determine the overall impact on the
count procedures. Consider expanding test counts
or having management re-count portions of the
inventory where the errors occurred.
A
E
EA
CA
EA
EA
ISA Engagement Forms July 2010

Inventory count checklist D.110
Page 2 of 2
AA
W/P
ref.
PSC
(Y/N)
(Initials)
Summarize exceptions
or difficulties encountered
6. Agree the test counts to:
a) Perpetual inventory records. EA
b) Entity’s final inventory listing. CEA
A
Investigate discrepancies and, if necessary, ensure
proper adjustments are made.
7. Review management’s cut-off procedures, as at the
count date, for both the physical inventory and
accounting records and ensure they are adequate.
8. Record details of relevant cut-off information (dates and
particulars of most recent receiving reports, and most
recent shipping memoranda) at the time of physical
count.
9. Inquire with a responsible staff member about inventory
that is slow-moving or obsolete.
10. Review the perpetual records for indications of slowmoving
and obsolete stock.
11. Tour the facility where inventory is being held and look
for signs that items may be obsolete or slow-moving
(i.e., damaged, dusty, etc.).
12. Tour premises at close of count and ensure all items are
counted (i.e., tagged).
13. Prepare memorandum on the results of the count and
any matters to be followed up later in the audit.
CA
A
V
V
V
C
A
Prepared by Date Reviewed by Date
ISA Engagement Forms July 2010