External audit method (inventory) is an optimal audit tool to create evidence in the auditing process of financial statements, overcoming the disadvantages of auditing documents in the case of an entity. Auditing of financial statements is not suitable for data validation.
The steps to perform the work of witnessing the inventory of auditors are listed as follows.
1. Receive inventory information from audit client
Near the end of the fiscal year, enterprises will send their auditors (KTV) detailed inventory plans and inventory lists.
Based on the information received, the auditor prepares documents related to the inventory content, prepares an inventory report, assesses materiality and selects inventory samples at the enterprise.
2. Participate in witnessing inventory
Auditors (Auditors) will participate in witnessing the inventory at the enterprise after receiving the inventory schedule provided by the enterprise. Note that auditors only witness inventory, not perform tallying for enterprises.
Witnessing means that the person participates, observes, sees, and acknowledges things happening in his or her presence. An inventory witness is a participant in an inventory meeting who observes the work of counting assets and records the organization, implementation of inventory, and results of inventory.
Inventory is the act of examining each item to determine the quantity available and the quality status of the object being inventory. The organization and implementation of the inventory under the responsibility of the enterprise are clearly defined in the Accounting Law.
For each auditor location participating in the inventory, the auditor must observe and record the inventory procedures performed by the customer as well as the auditor's procedures to ensure the inventory is reliable. , especially for finished goods, goods, raw materials, work in progress.
3. Conduct necessary audit procedures on inventory items.
The auditor selects the items with high value from the list of inventory assets / inventory and checks to the selected inventory item. Do an inventory and compare with the amount on the asset list / inventory.
In addition, the auditor also randomly selects the items in kind at the inventory location. Inventory in kind and compare with the quantity on the asset list / inventory. Collect copies or detailed records of relevant documents for the correct period at each inventory location such as the final release note (GDN), the final receipt (GRN).
Observe items with damaged, obsolete or slow-moving assets detected during an inventory and ensure provisions have been appropriately made, or those items have been excluded in list of assets at the end of the period.
At the end of an inventory, discrepancies discovered during an inventory are accountable by the enterprise, and presented in the inventory report to the parties.
Inventory is a very practical and practical non-documentary audit method that is very suitable for the audit function of confirming the data on the books through reality. Therefore, in auditing, inventory must always be closely linked to the general process as well as the detailed implementation procedures in related items.
For a better understanding of the steps to prepare for the fiscal year end inventory, you can refer to the article on “Inventory of assets at the end of the fiscal year, the things that businesses should note”By EXPERTIS.