Reference no: EM132702437

Question - You are auditing a company that runs a chain of small retail, hardware stores throughout Sydney, Newcastle, and Wollongong. The stores have electronic cash registers, and all sales are for cash or on debit/credit card. The stores stock a wide range of goods which are sourced from numerous different suppliers. The orders for goods are processed and placed by head office and delivered directly to the retail stores meaning there is no central warehouse. The company purchases all goods on credit with credit terms varying by each supplier. The payment of a correctly rendered invoice from a supplier is made by electronic funds transfer, after all required documents are collated and approved. The company uses a perpetual stock system and conducts regular test counts throughout the year.

Required -

a) Explain the controls that would be required to account for inventory movements at the local store level and in head office.

b) How should the stocktake of inventory be audited? What details are most important?