To test the existence of inventory (i.e., "sheet to floor"), enter the quantities from the Inventory Status Report downloaded from the website for the items indicated on Work Paper 5-2. Some inventory items selected for review have already been completed. Please note that the order of the Inventory Status Report and Inventory Count Tag columns is the reverse of Work Paper 5-1 to reflect the change in the order of observation (i.e., switching from "floor to sheet" to "sheet to floor"). Then locate the Inventory Tag in the PDF files downloaded from the website to confirm the existence and accuracy of the inventory item. In an actual inventory observation, the auditor would make selections from the Inventory Status Report and the client would take the auditor to the actual inventory item and the attached count tag. For this exercise, you will vouch the selections from the Inventory Status Report (i.e., the "sheet") to the tag provided in the file above (i.e., the "floor"). Compare the quantity from the Inventory Status Report with the quantity on the tag. For inventory items where the counts differ, briefly describe which management assertion(s) appear to be violated. (Leave no cells blank - be certain to enter "0" wherever required.)
Description of the inventory count process:
EarthWear’s Procedures: During EarthWear's year-end inventory count in each warehouse, representatives of the company count all inventory items and record the count for each inventory item on an inventory "count tag." Once the count at a particular warehouse is finished, all tags are collected and compared with the Inventory Status Report. Corrections are recorded on the Inventory Status Report and entered into the Inventory program.
Auditor’s Procedures: Inventory observation is a required procedure under Generally Accepted Auditing Standards. In addition to inquiry regarding the client’s count controls and procedures and observing the client’s overall inventory count process and the organization of the warehouse, the external auditor performs test counts on a sample of inventory items. Some of the selections are made from count tags, which are then traced to the inventory status report to verify that the inventory status report is complete and accurate. This procedure is often referred to as a “floor to sheet” test (i.e., all inventory items on the warehouse “floor” have been included in the inventory status report “sheet”), and is primarily a test for the completeness and accuracy assertions.
The auditor also makes some test count selections from the inventory status report and vouches the selected inventory items to the corresponding inventory count tags to verify that inventory listed on the inventory status report exists and is accurate. This procedure is often referred to as a “sheet to floor” test (i.e., all inventory items included on the inventory status report “sheet” represent items that actually exist on the warehouse “floor”),
GERMANY | |||||
Inventory ID | Description | Quantity on Inventory Count Tags | Quantity on Inventory Status Report | Difference | Describe any Violations of Management's Assertions |
101-2089 | Medium T-shirt | 32,789 | 32,789 | 0 | |
102-5573 | M Sweater | Enter Qty. Here | Enter Qty. Here | Enter Tag Count | |
102-8637 | XL Sweater | 94,202 | 94,202 | 0 | |
103-2538 | Photo 5 X 7 | 23,842 | 23,842 | 0 | |
103-7994 | Photo 11 X 17 | Enter Qty. Here | Enter Qty. Here | Enter Tag Count | |
104-9326 | Duffel Bag | 7,560 | 7,560 | 0 | |
JAPAN | |||||
Inventory ID | Description | Quantity on Inventory Count Tags | Quantity on Inventory Status Report | Difference | Describe any Violations of Management's Assertions |
101-2089 | Medium T-shirt | 23,324 | 23,324 | 0 | |
102-5573 | M Sweater | Enter Qty. Here | Enter Qty. Here | Enter Tag Count | |
102-8637 | XL Sweater | 19,805 | 19,805 | 0 | |
103-2538 | Photo 5 X 7 | 23,901 | 23,901 | 0 | |
103-7994 | Photo 11 X 17 | Enter Qty. Here | Enter Qty. Here | Enter Tag Count | |
104-9326 | Duffel Bag | 18,345 | 18,345 | 0 |
To test the existence of inventory (i.e., "sheet to floor"), enter the quantities from the Invent...
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