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Hello mam, I hope you are doing great!
I know that counting teams should include staff outside the warehouse. but I’m not sure if both the team members should be independent of warehouse or just one.
My question is in the context of Audit Risks.
As for instance if : ”The counting team includes a member of the internal audit department and a warehouse staff member”
Can I include as risk the fact that warehouse staff is also part of team? or Not because it is fine since anyway Internal Audit is an independent element of the team.
The standard most relevant to attendance at physical inventory (ISA 505 – Audit Evidence – Specific Considerations for Selected Items) is silent on the matter and there is no specific requirement for counts to be conducted by teams or for any team members to be independent of the warehouse.
The reason why warehouse staff should not have sole responsibility for the accuracy of the count comes down to the principle of segregation of duties “Assigning different people the responsibilities of authorising transactions, RECORDING transactions (in this case count quantities) and maintaining CUSTODY of assets.” The involvement of internal audit should be sufficient to ensure that warehouse staff cannot conceal errors during the count.
Involvement of warehouse staff is a risk – the auditor wouldn’t just ignore it – the involvement of internal audit should mitigate that risk – however, the auditor must have a response to the assessed risk – e.g. evaluating management’s count instructions and procedures to ensure that internal audit performs tests counts on counts recorded by warehouse staff.
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