Checklist for Audit of Inventories
- Account & Audit|Blog|News|
- 86 Views
- < 1 minute
- By Taxmann
- Last Updated on 18 April, 2022
Inventories are the assets held for sale in the normal course of business or in the process of production for sale or consumption in the production of goods or services for sale or in the form of materials or supplies to be consumed in the production process or the rendering of services. An auditor is responsible for the verification of compliance with the accounting principles and other legal provisions applicable to the entity in respect of inventories. One may adopt the following checklist for audit of inventories:
1. Has the entity used the following while determining the cost of inventories?
- Specific identification method for items that are not ordinarily interchangeable, or for goods or services produced and segregated for specific projects;
- For other inventories, FIFO or weighted average, whichever reflects the fairest possible approximation in the circumstances of the case; or
- Standard cost method or retail method (used for convenience where results approximate the actual cost)
2. Has the allocation of fixed costs to inventories been made on the basis of normal capacity?
3. Have duties and taxes that are subsequently recoverable from the taxing authorities been excluded from the cost of inventories?
4. Have all inventories been valued at the lower of cost and NRV?
Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.
Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.
The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:
- The statutory material is obtained only from the authorized and reliable sources
- All the latest developments in the judicial and legislative fields are covered
- Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
- Every content published by Taxmann is complete, accurate and lucid
- All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
- The golden rules of grammar, style and consistency are thoroughly followed
- Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied