Bafu Ltd., a private limited company, manufactures a wide range of bathroom fittings. These fittings are made from steel components which are chromed in small vats. The steel components are sourced from outside suppliers. The year end stock mainly consists of these steel components and finished items. As at 31 October 2004, the total stock was valued at Sh. 6,048,000 out of total assets of Sh. 19,200,000. This stock figure was obtained by a physical count as at 31 October 2004, and valuation by reference to purchase invoices and manufacturing cost estimates. Required: With reference to each of the matters listed below, state the work you would do to conclude whether the amount attributed to stock is fairly stated; Quantities

• Obtain copies of count sheets used at the stock take.
• Ensure the stock sheet include the specific date when stock count was actually carried out.
• Check whether there were any post-count adjustments made to quantities of stock recorded in the count sheets.
• Ensure no repetitions of stock counts. This would be done by making sure no stock item appears more than once in any count sheet, hence count sheets should be indexed as well.
• Check with management in case there are some items of stock in the count sheets that are not physically present in the store at the time of audit test.
• Verify that steel components were not mistakenly counted as finished items.

Share through

Leave a Reply

Your email address will not be published. Required fields are marked *