Inventory observation Essay

This is particularly important if the inventory is present in the financial statements. It is a good way to identify fraud and material misstatement. When auditing is it inventory to make an observation of inventory counting to ensure that the balance sheet has all the inventory assets that are owned by the company. Procedures to undertake before going for on-site inventory investigation Copy of procedures It is important that the auditor gets a copy of a manual for the client’s inventory. This manual contains company information on how to manage inventory. The auditor can test some few receiving and transactions on shipment before the counting and probably after the counting to assess if there is a proper accounting. Creating a fixture map This is a layout indicating the locations of all the stock and the layout of the store.

This map can either be manual or computer generated. This is a very important document during counting since the auditor can identify the items that have been skipped from their map. Prior visit It is important that an auditor visits the warehouse before the counting process. ADDRESSING ISSUES In the case study, some employees who were involved in the counting of the inventory abandoned the process to load a truck for shipment. this can disrupt the process of counting. Before conducting the observation, there should be meeting with all the parties that will take part in the counting (Smyth, 2008). They should be given a set of rules that they need to follow strictly during the counting. In addition, during counting all shipment and activities in the store.