Document ID: chunk:federal_register_of_legislation:F2023C01122:body:0:p5
Version: federal_register_of_legislation:F2023C01122
Segment Type: other
Provision Reference: 
Character Range: 12499–15951

Refer ASA 502  Audit Evidence—Specific Considerations for Litigation and Claims]

Segment Information

     13. The auditor shall obtain sufficient appropriate audit evidence regarding the presentation and disclosure of segment information in accordance with the applicable financial reporting framework by: (Ref: Para. A26)

(a)                Obtaining an understanding of the methods used by management in determining segment information, and:
(Ref: Para. A27)

(i)                 Evaluating whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework; and

(ii)               Where appropriate, testing the application of such methods; and

(b)                Performing analytical procedures or other audit procedures appropriate in the circumstances.

* * *

Application and Other Explanatory Material

Inventory

Attendance at Physical Inventory Counting (Ref: Para. 4(a))

A1.             Management ordinarily establishes procedures under which inventory is physically counted at least once a year to serve as a basis for the preparation of the financial report and, if applicable, to ascertain the reliability of the entity's perpetual inventory system.

A2.             Attendance at physical inventory counting involves:

           * Inspecting the inventory to ascertain its existence and evaluate its condition, and performing test counts;

           * Observing compliance with management's instructions and the performance of procedures for recording and controlling the results of the physical inventory count; and

           * Obtaining audit evidence as to the reliability of management's count procedures.

These procedures may serve as test of controls or substantive procedures depending on the auditor's risk assessment, planned approach and the specific procedures carried out.

A3.             Matters relevant in planning attendance at physical inventory counting (or in designing and performing audit procedures pursuant to paragraphs 4-8 of this Auditing Standard) include, for example:

           * The risks of material misstatement related to inventory.

           * The nature of the internal control related to inventory.

           * Whether adequate procedures are expected to be established and proper instructions issued for physical inventory counting.

           * The timing of physical inventory counting.

           * Whether the entity maintains a perpetual inventory system.

           * The locations at which inventory is held, including the materiality of the inventory and the risks of material misstatement at different locations, in deciding at which locations attendance is appropriate.

           * Whether the assistance of an auditor's expert is needed. ASA 620[4] deals with the use of an auditor's expert to assist the auditor to obtain sufficient appropriate audit evidence.

Evaluate Management's Instructions and Procedures (Ref: Para. 4(a)(i))

A4.             Matters relevant in evaluating management's instructions and procedures for recording and controlling the physical inventory counting include whether 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