Inventory audit methods are common in those businesses or firms where inventory is treated as a form of asset and an annual auditing of inventory is done every year. The audit of the inventory is conducted by the auditors that are specialized in inventory auditing. For large and complex inventory the inventory audit procedure is equally complicated and a number of difficult procedures are required to find out actual valuation of the inventory. There are a number of inventory audit methods and a few of them are explained as under:-
In this procedure the inventory is physically counted and receiving the inventory procedure are halted until of unless the entire stock of the products is counted and recorded.
Observe the Physical Count of Inventory
This is the method where the auditors discuss the physical count method of inventory with the business owners. They also observe the counting procedure being carried on in the inventory. They may also test count a part of inventory to verify your findings.
Testing high Value inventory
It is the process that is used when the items in the inventory are that of high value the auditors will spend their time in counting those high value items physically.
Test Error Prone Method
This method is used when the auditors find out an error in the previous records of the inventory. The auditors assume that if there was an error in the previous year counting of the inventory that error may also exists in this year as well.
These are the few methods of calculating and auditing inventory however there are a number of other methods that can be used by auditors to audit the inventory of a business.