Auditing & Assurance › Audit Evidence & Procedures
How do you audit inventory existence and valuation?
AdvancedAnswer
For existence, attend the physical count, observe count procedures, perform test counts (both directions), and reconcile to records. For valuation, test costing (cost vs net realizable value, lower of the two), check for obsolete/slow-moving items, and verify cost build-up. Cutoff testing ensures goods are in the right period.
Real-world example At the year-end stocktake the auditor test-counts items and later reviews aged stock for obsolescence write-downs.