- Work to be performed and matters to consider during the count
The main task is to ascertain whether the client‘s employees are carrying out their instructions properly so as to provide reasonable assurance that the stock take was accurate and not necessarily to count stock. This will be achieved by observing the way the count is conducted and also carrying out sample counts. When carrying out the sample counts the auditor should pick items from the shelves count these and compare the results with what was obtained by the count team. The following procedures should be carried out:
- He should make notes for follow up purposes of items counted in his presence, details of damaged, obsolete or slow moving items.
- He should find out the methods of identifying slow moving obsolete or damaged stock.
- Record fully the work done and his impression of the stock take exercise.
- He must form a conclusion as to whether the stock take can be relied on.
- Get photocopies of rough stock sheets.
- Get details of the sequence of the stock sheets.
- Pay special attention to high value items during his sample tests;
- If the auditor is not satisfied about the way stock taking was conducted he should inform management and may request a recount.
The auditor should conclude whether stock taking was properly carried out and can be relied upon for determining the existence of stock. He should also try to gain from his observations an overall impression of the levels and values of stocks held so as he may judge whether the value of stocks appearing in the financial statements is reasonable.