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Audit of Inventory & Warehousing Cycle - Coggle Diagram
Audit of Inventory & Warehousing Cycle
Accounts related to Inventory
Raw Materials
Work-in- Process
Direct Labours
Manufacturing Overhead
Finished Goods
Cost of Goods Sold
Main functions in the cycle
Process Purchase Order
Receive Raw Materials
Storing Raw Materials
Putting materials in production
Storing Finished Goods
Ship Finished Goods
Cycles tested for the Audit of Inventory
Acquisition & Payment Cycle
Payroll & Personnel Cycle
Inventory & Warehousing Cycle
Sales & Collection Cycle
Cost Accounting Controls
To ensure an accurate valuation of inventory, auditors have to understand the physical controls over Raw Materials, Work in Process & Finished Goods Inventory.
Tests of Cost Accounting
Physical controls over inventory, i.e. Inventory
Inspecting documents and records related to inventories.
Perpetual inventory master files.
Performing Analytical Procedures
Compare gross margin percentage
Compare inventory turnover
Compare inventory unit costs
Compare manufacturing costs
Client Physical Counts
Auditors' responsibilities:
Be present
Observe
Inquiry
Independent tests
Controls over physical count
Proper Instructions
Supervision
Independent internal verification
Inventory reconciliations of physical counts
Controls count sheets and tags
Audit Objectives
Existence
Completeness
Accuracy
Classification
Cut-off
Realizable value
Rights & Obligations