Inventory count

For entities which engage in activities which require them to hold inventory, the completeness, existence, accuracy and valuation of inventory give rise to a potential risk of material misstatement. As a result, the auditor seeks to gain comfort over the completeness and existence of the quantities.

The inventory count is to be managed, directed and performed by the client, with the auditor observing the count.

Since your question is specific to the role of the auditor, then that is the specific answer; the auditor is there to observe the count.
What does observation entail?
1. Completeness – The count is undertaken in such a manner to ensure that all items to be counted are counted. The procedure is developed by the client and the auditor is looking at whether the process works as designed and whether it is effectively implemented. In terms of items to be counted, there may be items in the warehouse which are not to be counted (for example items held on consignment, sold but not collected or otherwise already invoiced out of inventory.) In this case, there should be support to the cut-off assertion.
2. Existence – The auditor may review count sheets or the inventory listing (where available) and check that items can be found within the confines of the count area. The auditor will also check that items are found in the area to which they are allocated (for example if an item is noted as damaged or defective, it is segregated from other similar items noted as for sale or use)
3. Accuracy – The auditor will perform sample count of items to verify the count data as performed by the client count staff. Standard procedure is to take a selection from sheet to floor (ie take the count sheet and identify items for count and then count them). Sheet to floor sample selection generally takes place prior to the count when the client provides the inventory listing beforehand. The auditor will also perform floor to sheet counts. In this case, during the counting process the auditor will identify items within the count area, count them and trace these back to the count sheets.

At the end of the count, the auditor should reconcile any inventory identified for audit sampling back to the count sheet or inventory data and take a copy of the counting sheets as a record of the information obtained on that day.

Hope this provides some insight.