Inventory Observation Memo

Did not submit or incompletely determined the types of inventories these companies currently manage; Did not submit or incompletely described their essential inventory characteristics.

As focusing on each of the five management assertions for the inventory account, we discovered that there are some risky areas that indicate the need for further attention during the audit. First of all, for existence or occurrence, all items in the inventory account must physically exist and be available for sale. Thus, the auditors should physically count finished goods, copper rod, and plastic inventories, and determine actual increase of inventories at year end. Also, they should select items from the inventory ledger and locate them and reconcile the quantity. Second, for completeness, the auditors should make sure that all existing inventories have been recorded completely , go around the warehouse and ensure all the inventories are recorded in the inventory ledger. Third, for valuation or allocation, the auditors should make sure that Laramie Wire manufacturing sticks with one valuation method(For inventory items, valuation is based on the lower of cost or market value, with several alternative methods for calculating cost), find out if there is any scrap inventory that needs to be recorded and written off ,and ask about obsolescence items. Fourth, for rights and obligations, the auditor should ask them if there is any consigned inventory at their warehouse. If there is, those inventories should not be recorded in the company's inventory ledger. Finally, for presentation and disclosure, the auditors should review the company's financial

Q 3: Perform the following tests of controls. For each control state the command or commands that you did to test the

The process requires Peyton Approved to discover how much inventory is sold and what the cost of goods will result in. The process requires the business to review three forms of merchandise inventory to determine which summary benefits the business’s operational behavior. One will discover when assuming that first inventory purchased by the store is the first to be sold, it is determined that the FIFO method displays the best financial outcome for the business. During the process of updating journal entries, one must enter the information proved appropriately into the T-accounts to add the balance under each record. Once the T-accounts for transactions and adjusted transactions are balanced, the next step is to enter the information provided on the balance sheet. The balance sheet will list Peyton Approved assets, liabilities and stockholders equity after added during the T-account process (Nobles, 2014). Once the balance sheet is completed the income statement, statement of retained earnings, and closing entries can be filled with the information proved. This will give the business a full review from journal entry to closing entries of the business for the six month accounting

i. With regards to suppliers delivering goods, they simply sent the goods without any prior notification. This led to a variable rate of arrival of stock in the ware houses.

This worker should be restricted from taking stock. Close surveillance ought to diminish this danger. Pre-numbered dispatching forms that should be held responsible for may prevent this representative from transporting any merchandise to themselves or companions. Carrying out occasional surprise stock and resource counts and resolving the counts to the quantity documented in the records should make surveillance more practical. Utilizing systematic analysis to screen for bizarre patterns, for example, rising stock deficiencies is needed. Occasionally contrasting client and vendor addresses with those of representatives to keep workers from delivering products to themselves is likewise imperative. The bookkeeping function ought to be shared between the remaining two representatives and close surveillance ought to be carried out.

Your sister owns a small clothing store. During a conversation at a family dinner, she mentions her

Merchandising inventory is goods that have been acquired by a distributer, wholesaler, or retailer from suppliers with the intent of selling the goods to third parties. (Accountingtools.com, 2015) When choosing the type of method to use for merchandising inventory it is important for the business to understand what type of services or goods that are being provided. This can offer a better insight to the proper and most cost effective method. When deciding there are four types of inventory cost methods to elect from.

Auditors should always evaluate the design and test the operating effectiveness of a company’s internal control. The key procedures of the evaluation of design are fulfilled by inquires, observations, and inspections. The same procedures can be used to test the operating effectiveness as well.

In the early 1980 the consumer electronics industry was growing at an explosive pace. Between the 1981 and 1984 the total sales for the industry doubled. To support increasing sales massive amounts of inventory has to be procured, marked up and sold to consumers. Inventory becomes the biggest asset a retailer has. As part of the audit planning processes the inspection of the inventory system and verification of the actual inventory numbers should have been a priority. Crazy Eddie was able to inflate its financial results by fraudulently altering its inventory counts and was able to conceal these activities from the auditors for several years.

c. Trace the check number and amount of outstanding items – Occurrence, Completeness, & Accuracy (AU-C 315.A114 a.i-iii)

This step seems obvious, yet is all too often neglected. Careful cataloging when goods arrive not only helps with future insurance claims but also greatly eases ongoing checks and any later disputes as to when damage occurred. In fact, more loss may occur through accidental damage during the setup of displays than through theft. In addition, damage may not be noticed

goods. They can also be in process between different locations. Holding of inventories can cost a

Records of all the required sampling, inspection and testing procedures to demonstrate that all the products, formally assessed against the outlined specifications.

inventories of finished goods, or whether less was produced than sold, which would mean a