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Case Study The 1980 Year-End Inventory Of The Gravins Division

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The auditor’s primary objectives when he or she deserves the client’s annual physical inventory are existence, rights, accuracy, realizable value, completeness, classification, and cutoff. There are key audit procedures that an auditor would typically perform during and after the client’s physical inventory. One procedure would be to observe the client’s inventory-taking procedures. These inventory-taking procedures are either periodic inventory system or perpetual inventory system. If the company is using a periodic inventory system, the physical count determines the balance in the inventory account. If the company is using a perpetual inventory system, the physical inventory count can occur at any time during the accounting period. Because …show more content…

The first procedure that would have prevent the overstating of the 1980 year-end inventory of the Gravins Division is to test the cost accumulation process because this affects cost of goods sold and the valuation of ending inventory. Another procedure that might have prevented this would be to randomly select a sample of inventory, find them in the warehouse, and count them. Another procedure that might have prevented this would be to check the client’s procedures for evaluating and investigating warehouse inventory. There are some audit procedures that might have prevented Nashwinter from overstating the division’s 1980 year-end inventory. One procedure that might have prevented Nashwinter from overstating the division’s 1980 year-end inventory would be to obtain the internal control report from the client. Another procedure that might have prevented this would be to do a physical count and compare that to the computer system’s inventory count. In addition to that, another procedure that might have prevented the overstatement of the division’s year-end inventory would be to follow up discrepancies that other auditors have made notes of along with the notes of the

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