𝐖𝐡𝐲 𝐝𝐨 𝐰𝐞, 𝐚𝐮𝐝𝐢𝐭𝐨𝐫, 𝐧𝐞𝐞𝐝 𝐭𝐨 𝐩𝐞𝐫𝐟𝐨𝐫𝐦 𝐩𝐡𝐲𝐬𝐢𝐜𝐚𝐥 𝐬𝐭𝐨𝐜𝐤 𝐜𝐨𝐮𝐧𝐭?

According to 𝐈𝐒𝐀 𝟓𝟎𝟏 𝐀𝐮𝐝𝐢𝐭 𝐄𝐯𝐢𝐝𝐞𝐧𝐜𝐞 - 𝐒𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐂𝐨𝐧𝐬𝐢𝐝𝐞𝐫𝐚𝐭𝐢𝐨𝐧 𝐟𝐨𝐫 𝐒𝐞𝐥𝐞𝐜𝐭𝐞𝐝 𝐈𝐭𝐞𝐦𝐬 states that if inventory is material to the financial statements, t𝐡𝐞 𝐚𝐮𝐝𝐢𝐭𝐨𝐫 𝐬𝐡𝐚𝐥𝐥 𝐚𝐭𝐭𝐞𝐧𝐝 𝐭𝐡𝐞 𝐩𝐡𝐲𝐬𝐢𝐜𝐚𝐥 𝐢𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲 𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠 𝐭𝐨 𝐨𝐛𝐭𝐚𝐢𝐧 𝐬𝐮𝐟𝐟𝐢𝐜𝐢𝐞𝐧𝐭 𝐚𝐩𝐩𝐫𝐨𝐩𝐫𝐢𝐚𝐭𝐞 𝐚𝐮𝐝𝐢𝐭 𝐞𝐯𝐢𝐝𝐞𝐧𝐜𝐞 𝐫𝐞𝐠𝐚𝐫𝐝𝐢𝐧𝐠 𝐭𝐨 𝐭𝐡𝐞 𝐞𝐱𝐢𝐬𝐭𝐞𝐧𝐜𝐞 𝐚𝐧𝐝 𝐜𝐨𝐧𝐝𝐢𝐭𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐢𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲, unless impracticable.

If physical inventory counting attendance is impracticable, auditor shall perform 𝐚𝐥𝐭𝐞𝐫𝐧𝐚𝐭𝐢𝐯𝐞 𝐚𝐮𝐝𝐢𝐭 𝐩𝐫𝐨𝐜𝐞𝐝𝐮𝐫𝐞𝐬 to obtain sufficient appropriate audit evidence regarding to the existence and condition of the inventory. When alternative audit procedures are not possible and applicable, then 𝐭𝐡𝐞 𝐚𝐮𝐝𝐢𝐭𝐨𝐫 𝐬𝐡𝐚𝐥𝐥 𝐦𝐨𝐝𝐢𝐟𝐲 𝐭𝐡𝐞 𝐨𝐩𝐢𝐧𝐢𝐨𝐧 𝐢𝐧 𝐭𝐡𝐞 𝐚𝐮𝐝𝐢𝐭𝐨𝐫’𝐬 𝐫𝐞𝐩𝐨𝐫𝐭 𝐢𝐧 𝐚𝐜𝐜𝐨𝐫𝐝𝐚𝐧𝐜𝐞 𝐰𝐢𝐭𝐡 𝐈𝐒𝐀 𝟕𝟎𝟓.

If the auditors are unable to attend the physical stock count on the date of the financial statement for practical reasons, inventory count may be performed on 𝐚𝐧 𝐚𝐥𝐭𝐞𝐫𝐧𝐚𝐭𝐢𝐯𝐞 𝐝𝐚𝐭𝐞, and perform audit procedures on intervening transactions.

If inventory under the custody and control of a third party is material to the financial statements, the auditor shall request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity or perform inspection or other appropriate audit procedures.

Where a perpetual inventory system is maintained, management may perform physical counts or other tests to ascertain the reliability of inventory quantity information included in the entity’s perpetual inventory records. When differences between the perpetual inventory records and actual physical inventory quantities on hand are identified, the considerations when designing audit procedures are whether the perpetual record are properly adjusted by the management, reliability of the system or reasons of the significant differences.

𝐒𝐎𝐔𝐑𝐂𝐄
𝐈𝐒𝐀 𝟓𝟎𝟏 𝐀𝐮𝐝𝐢𝐭 𝐄𝐯𝐢𝐝𝐞𝐧𝐜𝐞 – 𝐒𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐂𝐨𝐧𝐬𝐢𝐝𝐞𝐫𝐚𝐭𝐢𝐨𝐧 𝐟𝐨𝐫 𝐒𝐞𝐥𝐞𝐜𝐭𝐞𝐝 𝐈𝐭𝐞𝐦𝐬
http://www.ifac.org/…/…/a023-2010-iaasb-handbook-isa-501.pdf

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