W. P. No.

Inventory Audit Program Auditor

Date

Process description: Purchasing and Disbursements.

Audit Objectives
1) all inventory items exist and owned by the Company (existence, completeness, and
ownership);
2) inventories stated at the lower of cost determined by LIFO method, or market
(valuation);
3) inventory items are properly classified and disclosed (presentation, and disclosure).
Done by Work paper
and date
1. Perform test of controls of the purchasing and disbursement
process.
2. Review written narratives related to the standard cost
accounting system and the control procedures related to the
audit objectives.
3. Perform an inventory observation of raw materials, finished
goods, and purchased components on July 25. AUDITOR will
then agree the counts into the July inventory detail and
reconcile to the July 2000 financial statements
4. AUDITOR will obtain inventory lead sheet from the client
including current and prior year balances and perform a
detailed top-side analytical review of the changes which
occurred from the prior year
5. After each year end the Company re-values its inventory to a
new standard. This standard is amortized over the 12 months
of the new fiscal year. AUDITOR will review the client’s
calculation of the revaluation amount and compare it to the
prior year. AUDITOR will investigate and document the reasons
for the changes, if significant.
6. AUDITOR will perform price testing procedures on 10
judgmentally selected raw materials and finished goods. These
procedures will include ensuring variances are accounted for
properly.
7. AUDITOR will obtain a documentation of the client method of
calculating its LIFO reserve and review for reasonableness
8. AUDITOR will perform substantive testwork to review the
client’s LIFO calculation for year end and the related
adjustments
9. AUDITOR will determine the appropriateness of the Company’s
obsolescence/excess reserve based on the specific reserve
identified and a general reserve calculated based on historical
trends
1 AUDITOR will review the Inventory Usage Report as of year end
0. to determine if there are any potential obsolescence issues
with the appropriate client personnel

R. B. Alvarez Accounting Office

R. B. Alvarez Accounting Office