As part of your annual audit, your auditor will most likely perform an observation of your inventory. Rather than count all inventory, instead we perform random test counts to validate the numbers on your financial statements.
When an auditor arrives to complete the inventory count, our procedure is examining for accuracy of your reports. We are not performing the count to provide you with the correct number to put in your financial statements. There are a few steps business owners and organization leaders can take to make the processes smoother both for themselves and for the auditors coming to visit.
Audit Inventory Count
Step 1: Count
Whether you perform cycle counts throughout the year or annual counts at yearend, it’s important to assign someone to do a physical count on a pre-determined schedule in order to corroborate the information in your system with the physical inventory on hand. Even though you may be able to track inventory through your software, like Fathom, physical inventory counts are a necessary procedure and can protect against fraud.
Step 2: Compare and Update
If there are any discrepancies between your physical count and what is listed in your system, you will want to do the research to determine what has caused this. It is better to update your reports before an auditor arrives to complete an Inventory Count.
Step 3: Keep A Detailed List
In addition to keeping your inventory listing up-to-date based on the physical counts, we recommend that you include each physical location where inventory is stored. On this list, you’ll maintain tracking of the items at each of the locations and include descriptions (such as quantity, condition, manufacturer’s number). Having inventory categorized between locations will make it easier to complete steps one and two.
Step 4: Have a Guide
When the auditors arrive, it is extremely helpful to send someone with them who can serve as a guide. This person should be knowledgeable in your inventory processes and procedures. They should also be able to identify the various items and where they are stored so the auditors can complete their job more efficiently. Lastly, the designated guide should be able to identify if any items are not included in inventory and the reason behind this.
Avizo Inventory Audit Process
An Inventory Count is usually conducted by the auditor at the end the business cycle, or at “year-end” as part of their audit procedures. However, an inventory count can also be performed at any time as an Agreed Upon Procedure if you feel your inventory processes need to be re-evaluated. A team of professionals can help your organization determine if you have appropriate inventory levels, identify inefficiencies, both which can ultimately help your budget. If you’re interested in completing an inventory count, please reach out to our team to set up a conversation.
Kirsten Robertson
A Strategic Analyst on our assurance team, Kirsten maintains expertise to provide auditing services with a specialization in Avizo’s governmental and construction-based niches. She is one of the primary leads on our in-field audits and completes training for all members of the firm before they visit clients offices.
