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Dear tutor,
There are some problems confuse me at the moment when I practice questions and looking at the answers relating to inventory counting. (DECE&CO) Sorry for making such a long question for you…
1) Some Records are produced by client’s staff in this period,which includes ‘count sheet’,’final inventory sheet’,’inventory statement’. And I kinda of confuse with the relationship among them.
a. Does client staff will transfer the data recorded on the ‘count sheet’ to the ‘final inventory sheet’ ? So in this process there may be some amendments by client. In order to prevent it, the auditor would photocopy a sample of count sheet, which will be compared with the ‘final inventory sheet’ afterwards. ( Is my understanding right?)
b.When test the valuation, answer said compare the value on expert’s report to ‘inventory statement’. Is ‘inventory statement’ a inventory ledger?
c.Also in valuation, auditor would trace a sample of items’ cost on ‘final inventory sheet’ to original invoice and ensure their description matches. Are all the description and cost should appear on ‘final inventory sheet’? What about the ‘count sheet’?
2) To perform cut-off test, if I want to confirm Receivables and Sales a/c, I should obtain the last GDN or sales invoice? Or either will do?
Thanks in advance!!!!
(a) you are correct I think, though I don’ think the terminology is standardised. I assume the count sheet is what the counters go round with when counting. Then information is transferred to inventory sheet.. Errors could be made during transfer.
(b) I assume inventory statement is final summary of inventory value, perhaps divided over major categories. This value will then be in the financial statements and inventory account in ledger.
(c) Description and quantity should be on both, but value will only be on the inventory sheet. Value is added after the count.
(d) you need both. You want to ensure all despatched have been invoiced and everything invoiced has bee despatched (so not also in inventory).
HTH
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