ACCA F8 - Audit and Assurance Revision Kit 2016

Deficiency
anomalies noted, as the identity of the counters
may not be known.
Inventory not listed on the sheets is to be entered
onto separate sheets. These sheets are not
sequentially numbered and the supervisor will be
unable to ensure the completeness of all inventory
sheets.
The responsibilities of each of the two staff
members within a counting team is unclear. It does
not appear that one has been told to count and the
other to check. Therefore errors in counting may
not be picked up.
Recommendation
Every team should be given a blank sheet on which
they can enter any inventory counted which is not on
their sheets. The blank sheets should be sequentially
numbered with any unused sheets returned at the end
of the count. The supervisor should then check the
sequence of all sheets.
For each area one team member should be asked to
count and the second member asked to check that the
inventory has been counted correctly. The roles of
each can then be reversed for the next area.
(Note: Only six deficiencies and six related recommendations were needed to gain 12 marks.)
(b)
Procedures undertaken during the inventory count
– For a sample of inventory items, carry out test counts from aisle to inventory sheet to test
completeness and from inventory sheets to aisle to test existence.
– Obtain and record details of the last goods received notes (GRNs) and goods despatched notes
(GDNs) for 31 December to form the basis for cut-off procedures at the audit.
– Observe whether teams carrying out the count are adequately following the inventory count
instructions.
– For a sample of items marked as damaged on the inventory sheets, inspect the windows to verify that
the level of damage has been correctly recorded.
– Observe the procedures for movements of inventory in and assess the risk that raw materials or
finished goods have been missed or double counted.
– Photocopy the inventory sheets for follow up and use when performing procedures at the final audit..
– Ascertain how the warehouse manager is assessing the level of work-in-progress by observing the
assessment and by reviewing his assumptions, and consider how consistent his estimate is with
observed levels.
– Ask the warehouse manager how he has estimated the raw materials quantities and review his
calculations and any assumptions for reasonableness. Re-perform a sample of the measurements of
height and width forming the basis of any calculation to see if they are accurate.
– Confirm any third party inventory observed has been excluded from the count.
– Confirm that the procedures for identifying and separately storing damaged goods are operating
effectively.
(Note: Only six procedures were needed to gain full marks).
(c)
Computer assisted audit techniques
(i)
Audit procedures
Software can be used to cast the inventory listing to confirm the total is complete and accurate..
Audit software could be used to extract a statistical sample of inventory items in order to verify their
cost or net realisable value (NRV).
Calculations of inventory days or inventory turnover could be carried out by audit software, before
being used to compare against the same ratios for the prior year or of competitors. This will help to
assess the risk of inventory being overstated.
Answers 147