Summary Inventory Cycle – Auditing Notes + Exam Approach (BCom Acc 3 / BAcc 2)

AUDITING NOTES


INVENTORY CYCLE:
This cycle focuses on the on the year end count (inventory counting) to determine the
inventory on hand, inventory sold and the inventory damaged/stolen.


HOW DO WE ENSURE EFFECTIVE & EFFICIENCY COUNTING OF INVENTORY? This
Cycle Addresses that
Year-end counts:
STAGE 1: PLANNING INVENTORY.
This is where the planning of inventory count begins, including which location to use and
methods to use for effective counting


FACTORS TO CONSIDER WHEN DETERMINING THE EFFECTIVENESS OF THIS
STAGE
ASPECTS OF THE PLANNING:
- Time and date
- Methods to use for counting.
- Warehouse floorplan.
- Who will supervise?
- People who will do the counting/staff requirements.
- Location and categories of the count.
Methods of Inventory Count:
✓ Team members team counting the same area twice – one member counts while
the other records (then swap roles)

✓ Two members counting different areas – One team does the count and complete,
then the other team comes and do the count on the same section


STAGE 1: DESIGN INVENTORY
This mostly refers to the materials that are used to effectives do the inventory count (e.g.,
placing stickers on damaged inventories to ensure that they are easily noticeable)
FACTORS TO CONSIDER WHEN DETERMINING THE EFFECTIVENESS OF THIS
STAGE
ASPECTS OF DESIGN INVENTORY
- Must have a COUNT-SHEET, which
Excludes the Perpetual inventory records.
- Must have INVENTORY TAGS for inventory counted
- Must have AJUSTMENT FORMS for discrepancies.