Document ID: chunk:federal_register_of_legislation:F2023C01122:body:0:p6
Version: federal_register_of_legislation:F2023C01122
Segment Type: other
Provision Reference: 
Character Range: 15644–18836

they address, for example:

           * The application of appropriate controls, for example, collection of used physical inventory count records, accounting for unused physical inventory count records, and count and re-count procedures.

           * The accurate identification of the stage of completion of work in progress, of slow moving, obsolete or damaged items and of inventory owned by a third party, for example, on consignment.

           * The procedures used to estimate physical quantities, where applicable, such as may be needed in estimating the physical quantity of a coal pile.

           * Control over the movement of inventory between areas and the shipping and receipt of inventory before and after the cut-off date.

Observe the Performance of Management's Count Procedures
(Ref: Para. 4(a)(ii))

A5.             Observing the performance of management's count procedures, for example those relating to control over the movement of inventory before, during and after the count, assists the auditor in obtaining audit evidence that management's instructions and count procedures are adequately designed and implemented.  In addition, the auditor may obtain copies of cut-off information, such as details of the movement of inventory, to assist the auditor in performing audit procedures over the accounting for such movements at a later date.

Inspect the Inventory (Ref: Para. 4(a)(iii))

A6.             Inspecting inventory when attending physical inventory counting assists the auditor in ascertaining the existence of the inventory (though not necessarily its ownership), and in identifying, for example, obsolete, damaged or ageing inventory.

Perform Test Counts (Ref: Para. 4(a)(iv))

A7.             Performing test counts, for example by tracing items selected from management's count records to the physical inventory and tracing items selected from the physical inventory to management's count records, provides audit evidence about the completeness and the accuracy of those records.

A8.             In addition to recording the auditor's test counts, obtaining copies of management's completed physical inventory count records assists the auditor in performing subsequent audit procedures to determine whether the entity's final inventory records accurately reflect actual inventory count results.

Physical Inventory Counting Conducted Other than At the Date of the Financial Report (Ref: Para. 5)

A9.             For practical reasons, the physical inventory counting may be conducted at a date, or dates, other than the date of the financial report.  This may be done irrespective of whether management determines inventory quantities by an annual physical inventory counting or maintains a perpetual inventory system.  In either case, the effectiveness of the design, implementation and maintenance of controls over changes in inventory determines whether the conduct of physical inventory counting at a date, or dates, other than the date of the financial report is appropriate for audit purposes.  ASA 330 establishes requirements and provides guidance on substantive procedures performed at an interim date.[5]

A10.         Where a perpetual