AUDITING AND ASSURANCE II

PROBLEM BASE LEARNING (PBL)

TASK IV – Chapter 9

Lecture :

Drs. Sudarmadji Herry Sutrisno, MM.

Teungku Alief Ambya (023001801175)

Fedryansyah (023001801219)

Misbah Hoiriyah Siregar (023001801144)

JURUSAN AKUNTANSI

FAKULTAS EKONOMI DAN BISNIS

UNIVERSITAS TRISAKTI

JAKARTA
a) Explain why the audit of NRV value is more problematic then the audit of inventory cost. what
specific step might the auditor take to check whether valuation at NRV would be appropriate?
Answer :

The NRV method for measuring future inventories is more problematic for the auditor than the
cost method because NRV is still future, whereas costs have been incurred in the past. That is,
the auditor must look for evidence of conditions that may occur after the balance sheet date.

The auditor needs to conduct a review of inventory turnover to identify slow moving inventory
and sales trends of that inventory. It is used to determine whether inventory turnover and sales
trends have increased or decreased in this period or the next. In particular, auditors need to:

1. Determines whether the company will maintain production levels for slow moving lines.
This can increase indicating that sales management will improve. The auditor may
request detailed management account details showing the level of sales in the coming
year and seek external evidence.
2. If the inventory level appears to be substantially higher than the sales budget, the
auditor may ask for related actions to reduce the inventory (for example, by lowering
the sale price or increasing sales effort).
3. Test the movements and prices in the period after the balance sheet date.
4. Check if the line supplies into this price list. If not included, this indicates that
management considers it obsolete and therefore the auditor should consider provisions
for ending inventory as well as any immediate material needs.
5. Review the minutes of directors to obtain written evidence regarding the decisions of
the directors.

b) What audit procedures would the auditor use in determining whether costs of production to
complete work in progress at the balance sheet date are appropriate ?
Answer :

1. Set the stage of completion of WIP. For items of a significant nature, auditors can ask for
assistance from experts and discuss with the production team.
2. Determine costs from unfinished stages, check costing records, and extract unallocated
direct and overhead costs for WIP production. During the inventory count, auditors need
to make notes regarding the last requisition for raw materials as well as the last workforce
allocation for WIP. The budgeted overhead allocation also needs to be examined as a
basis for determining the overhead that still has to be applied.