You Are the Auditor of an Engineering Firm Called Thumpit

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The Answer is It is important that the company establishes controls to ensure that all inventory is counted and that there is no double counting of inventory. The fact that the company is receiving and
despatching goods and also continuing to produce goods on the day of the inventory count
increases the likelihood of inventory being counted twice. The procedures which the company could adopt to ensure an accurate inventory count are:
-Ensure that a responsible official has overall control of the counts, all queries and
-matters of difficulty to be referred to them.
-Inventory should be arranged in an orderly manner and each item of inventory identified by a tag which should be clearly marked when the inventory has been counted. On the completion of the count, all the tags should be checked as being marked.
-Inventory sheets should be prepared by the company detailing the type and reference numbers of inventory to be counted.
-The inventory count teams should be allocated specific locations to count, or the inventory should be counted in pre-determined sequence by the count team.
-Movement of inventory should be kept to a minimum. In this case, if an emergency requisition for goods is authorised on the day of the count, then a record of all requisitions should be made and reviewed by the responsible official in charge of the count. It must be ensured that these items are excluded from inventories of unassembled parts and sundry inventories as they will be included in work in progress or finished goods inventory.
-The company must ensure that all goods received during the day of the inventory count are segregated and counted when no more receipts are expected. It is important that these items are controlled so as to prevent cut-off errors (see below) and double counting of inventories.
-Goods which are to be despatched during the day of the count should again be segregated and not included in the final inventory figure. One of the best ways to ensure this is to record all goods to be despatched on a separate inventory count sheet, mark the goods as having been dealt with and eliminate the inventory count sheet from the final inventory evaluation.
-As appliances completed on 31 August 201X are to remain in the assembly plant and the only inventory movement on the day of the count will be emergency requisitions of goods (which should be minimal), the assembly plant can be treated as a separate unit for inventory count purposes. Therefore, the best way of ensuring the accuracy of the count of inventory in the assembly plant is to wait until the cessation of production at 5 pm on the date of the count, and carry out the count of inventory and work in progress when there is no movement of inventory.

You Are the Auditor of an Engineering Firm Called Thumpit

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