Inventory Observation Memo

1409 Words Oct 6th, 2012 6 Pages
INVENTORY OBSERVATION MEMO

1. Before commencement of verification, the management should issue appropriate instructions to stock taking personnel. Such instruction should cover all phases of physical verification and preferably be in writing Auditor should examine these instructions to assess their efficacy

In the given Case; Manager, Andrew Jacobs issue said instructions to count team. But, while issuing instructions, no consideration was made to: • Stock held by company but related to other parties, like goods to be returned to the supplier but not yet done, Goods sold but delivery not yet taken by customer. • Stock in Transit • Stock in Process • Stock with customers, in case of
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5. Count Tag on every pallet was observed to avoid double counting of single item. But information listed on tags was not subject to review by any second count team

6. Proper consideration should be paid to the physical condition to the inventories In Given Case, some pallets of shoes stacked were near the back of the warehouse which were covered with dust and looked very old.

7. Various other procedures were followed, in order to ensure working of controls and to test their adequacy.

• Original physical verification sheets were reviewed and some valuable items were traced and selected into the final inventories.

• Details of final inventories were compared with stock records and other corroborative evidences like stock statement submitted to banks for hypothecation.

• The procedures adopted by the entity to account for the movement of inventories from one location to another within the entity were reviewed.

• Inquiry had been made relating to the security procedures to prevent unauthorized removal or materials from the site by either employees or others.

• It was being ensured that warehouse or storeroom was orderly arranged and maintained and the stock adequately protected against the weather or other losses.

• Examination of sample of documents was made for evidencing the movement of stock into and out of stores, including documents pertaining to period shortly before and shortly

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