Audit and Accounting > Inventory and Stock

Inventory and stock can vary in volume and cost across organizations.

The following are commonly used tests (grouped by type).

Analysis

  • Reconcile physical counts to computed amounts
  • Analyse usage and ordering to improve turnover
  • Analyse high value transactions
  • Summarise and stratify turnover by stock item
  • Summarise stock on-hand by group, location, type, etc.
  • Create custom reports on stock and high value balances
  • Review product reordering volumes by item, warehouse, and vendor
  • Summarise products by group, location, type, etc.
  • Summarise and stratify turnover by stock item in any order
  • Age inventory (e.g., by date of receipt)

Calculations

  • Report on products in order of profitability
  • Statistically analyse usage and ordering to improve turnover
  • Test clerical accuracy of totals and extensions
  • Check product reordering volume by item, warehouse, and vendor
  • Determine the percentage change in sales, price and/or cost levels by product/vendor
  • Assess the financial viability of LIFO versus FIFO management

Exception Tests

  • Identify surplus obsolete/damaged inventory by sorted turnover analysis
  • Identify differences between standard costs and actual costs
  • Identify stock acquired from group companies
  • Segregate variances from standard pricing in amount order
  • Isolate stock lines/products with cost greater than retail price, with zero/negative quantities, or with zero/negative prices
  • Isolate items where stock exceeds maximum stock levels
  • Select items from perpetual stock for test reconciliation

Gaps and Duplicates

  • Test for duplicate parts, item numbers, prices or descriptions

Matching and Comparing

  • Compare yearly volume with on-hand quantity for stock items
  • Compare cost to retail price to look for pricing discrepancies
  • Compare the value of physical counts to general ledger value

Sampling

Monetary Unit or Random samples for physical verification or checking additions