Explanation On How The Auditor Carry Out The Procedures On Stock Verification
An Auditor should be able to analyze the complete stock details of the business company. The records made on the company book must also be thoroughly checked for knowing the fairness of representation of the stock items. Learn more about his responsibilities here.
- He has to precisely examine some of the important stock products with their invoices so as to get a review of their price details.
- Also, observe the quantity list of the stocks in the record book and see if those are clearly detailed in the stock book of records.
- He must assure that the stock valuation follows a standard procedure and the strategy is the same as the previous year.
- Further, he must assess if the outdated and other detective stock items are shown at reasonable prices.
- He should make a comparative analysis of the percentage of gross profit obtained on the turnover with that received on the previous year. If any notable fluctuation is observed, enquire into the cause of the actual situation and this must be documented in the Auditor’s note. It is important to note
- Whether the items written as sold and not transported are not included.
- Also, take care of the condition when the goods once brought and not registered in the invoice book are included in the company turnover account.
- In the case of any unfinished goods, the Auditor must ensure if its value is taken at the real price. Further, these must be evaluated on the basis of the cost of raw materials utilized and the wages spend on manufacturing it. All these expenses will be enlisted in the respective date of the Balance Sheet.
There can be circumstances when a small extra cash is added to the above cost to account the factory cost in manufacturing this item along with the fuel, light consumption of the processing plant.
- Similarly, in the case of any finished goods, a good percentage on workplace cost is cumulated to the work cost.
- In addition to this, the Auditor must confirm if all the goods vended for approval basis are clearly stated in the closing stock account.
- Make sure the stock that is held on any liable reason are not further delivered to the agent on his consignment.
- Finally, he must clarify with the stock sheets to certify that the stock contains only those things that are dealt with by the client and never include any of the purchased assets.