goforCPA
offlineMember
Hi all,
Is observing inventory count a required audit procedure? If so are there any instances in which this procedure may deemed to be not required (i.e. if inventory is immaterial)?
Thanks
See Pee A
offlineMember
Very few audit procedures are specifically required. As you mentioned inventory observation may be impractical or immaterial and the auditor may choose to employ alternative procedures.
ttd
offlineMember
If I have my notes correctly (will be taking the test next week), this is what it says in AU 331:
Observation of inventories is a generally accepted auditing procedure. It is normally necessary for the CPA to be present when inventory quantities are determined by means of a physical count. When a CPA has not oberserved the counting of inventory, he must perform the physical count subsequent to the client's count.
An auditor who omits the observation of inventories must be able to justify the decision in the working papers.
Unfortunately, I didn't catch what justifies the omission.
See Pee A
offlineMember
There are no specific requirements for what "justifies" doing/not doing a specific procedure. It's all up to the auditor's judgment about what will result in sufficient and reliable audit evidence. In the AUD course, they go through many "typical" procedures for certain audit objectives or for certain accounts, but in every case, like @ttd mentioned, there is auditor judgment.
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