Existence - detailed audit of stock, Auditing

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Existence - Detailed Audit of Stock

In the previous the auditor accepted a director's certificate as to the existence of stocks.  Until some cases specifically in the United States of America were decided against auditors for their failure to contain adequate independent evidence such the stocks related were in existence.  On some occasions, auditors certified accounts as providing a fair and true view if the stocks concerned were non-existent. The unfavorable decisions against the auditor have effected in the profession making it obligatory such where the stocks are an important figure in the accounts the auditor should proof existence.

This is realized chiefly by the client managing for a stock take and the auditor attending to examine the stock take.

Whether is not the auditor's duty to take stock?  However he must satisfy himself as to the validity of the amount attributed to stocks in the accounts which are the subject of his audit.  In ascertaining the extent and nature of the audit steps essential for this reason the auditors must scan the system of internal control in order to assess its effectiveness concern to the evaluation and ascertainment of work and stocks in progress.  Whenever it will not commonly be essential for the auditor to observe the whole stock take or visit all place their tests should warp a representative section of the stock.  Where stocks are held at a number of places the selection of the places to be visited would be planned as to cover all important locations over a time of years.

The amount at that stock is stated in the accounts should be based upon a physical stock taking at the year finish or upon information contained from stock records.  If stock is based on records these must be substantiated through periodical or continuous physical stock takings.  The processing should ensure:

a) Sufficient stock records are remained up to date.

b) Each category of stock is checked at least once a year and a record of verify maintained.

c) Whether the checking is continuous, it is done systematically over the years or whether periodic at appropriate times, which as when stocks are low or have reached a particular reorder point.

d) All differences are generally investigated and the records amended therefore. There have to be kept schedules of differences along with details of the action such was taken.


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