The valuation of closing stock is the important factor in determining the operating result.
Cost accounting system if it exists in the company will give the value of closing stock. But if cost accounting system is not in place, then physical stock verification needs to be done in the stores as well as on the shop floor and finished good stores.
Stock taking is the procedure or process of physical verification of stocks at periodic intervals.
Persons undertaking physical verification should be different from those responsible for store-keeping in respect of those stocks.
The auditor has to obtain sufficient appropriate audit evidence to corroborate the management's assertions regarding closing stock.
- that all inventories owned by the entity recorded and all recorded inventories are owned by the entity.
- that all recorded inventories exist at the year-end under the ownership of the entity.
- that the stated basis of valuation of inventories is appropriate and properly applied, and that the condition of inventories is recognized in their valuation.
The procedures used in auditing of inventories are:
1. Examination of records
2. Attendance at stock taking
3. Obtaining confirmations from third parties regarding invetories in their premises.
4. Examination of valuation policies and procedures
5. Analytical review procedures.
Knol Number 469
Cost accounting system if it exists in the company will give the value of closing stock. But if cost accounting system is not in place, then physical stock verification needs to be done in the stores as well as on the shop floor and finished good stores.
Stock taking is the procedure or process of physical verification of stocks at periodic intervals.
Persons undertaking physical verification should be different from those responsible for store-keeping in respect of those stocks.
The auditor has to obtain sufficient appropriate audit evidence to corroborate the management's assertions regarding closing stock.
- that all inventories owned by the entity recorded and all recorded inventories are owned by the entity.
- that all recorded inventories exist at the year-end under the ownership of the entity.
- that the stated basis of valuation of inventories is appropriate and properly applied, and that the condition of inventories is recognized in their valuation.
The procedures used in auditing of inventories are:
1. Examination of records
2. Attendance at stock taking
3. Obtaining confirmations from third parties regarding invetories in their premises.
4. Examination of valuation policies and procedures
5. Analytical review procedures.
Knol Number 469
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