Inventory

Moreover, inventory frequently addresses the most significant asset on the statement
of financial position. To audit the inventory of a company well, the company should conduct
audit procedures with the course of cross-checking monetary records with actual stock and
records to guarantee precise inventory accounting (Corporate Finance Institute, 2021).

First, an inventory audit can be as simple as just taking an actual count of stock and
inventory to confirm a match to the bookkeeping records. Therefore, the audit procedures of
inventory count are classified intro three stages which includes before the count, during the
count and after the count. In the beginning the auditor must plan to have inventory control
before an inventory count. In this case, the auditor should acquire understanding from the
organization by analysing preceding year’s plans and performing analytical procedures. This
is the way to a successful and productive audit as auditor comprehend the company’s internal
control and condition to evaluate risks of error easily as well as assist an auditor know the
client's business well and changes in the business. It is essential to assess the critical elements
of inventory control in order to have the planning procedures to ensure each factor has an
advance plan for what to do. During the count, the auditor whether the customer's staff are
adhering to directions. Stock count sheets also need to have inspection by the auditor to
guarantee that it is pre-numbered. To make sure strategies and internal controls are working
appropriately, test counts are required to perform by the auditors. The auditor ought to affirm
that inventory held in the name of third parties is independently recognized and accounted
for. After the count, items that were test counted to final inventory sheets must discovered by
the auditors and they should examine all count records have been covered in final inventory
sheets and final inventory sheets are upheld by count records.

On the other hand, cut-off analysis is also one of the audit strategies to control the
stock (Weatherwax, 2021). Before the count, the auditor needs to ensure there is suitable
frameworks of documenting the received of goods and despatches of merchandise are set up,
and a system for recording the materials requisitions. Goods despatch notes, final good
received notes and materials requisition numbers are also required to be noted. During the
count, auditors should record all movement notes relating to the period and see whether right
cut-off procedures are gone in the same direction in the despatch and receiving areas.
Discussion with company staff about the procedure of performing the count to ensure they
are clearly understood. At the final audit, cut-off by noting the serial numbers of good
received notes and good despatch notes should be checked by auditors whether it is received
and despatched before and after the end of the financial year, and subsequently checking that
they have been included in the correct period.
Account Receivables

Additionally, accounts receivable is the amount of cash that your clients owe you for
the goods and services you have offered to them on credit. Accounts receivable is significant
because it is the cash you use to maintain your business. Therefore, auditors pay
consideration to a business’ assets especially accounts receivable to guarantee there is no
mistakes included. Inspecting the business’s receivables is important because it sheds light
upon the situation of a business’ incoming cash (Krishnan, 2021).

To manage the value of account receivables adequately, there are some of the
procedures associated with examining an accounts receivable. First, substantive procedures
are necessary to check the completeness and accuracy of a client prepared list. In conducting
substantive procedures, the auditors ought to concur the balances from the single receivable
ledger accounts to the list of balances and vice versa (Accounting Tools, 2021). Match the
total of the list to the receivable ledger control account is also important to avoid any
misstatement. Cast the list of balances and the receivable ledger control account is also
required to perform by the auditors.

Furthermore, there is another substantive procedure that should perform by the auditor
which called circularization. When circularisation is attempted, the method of asking for data
from the clients might be either positive or negative. Under the positive method, the customer
is mentioned to affirm the precision of the balance shown or state in which areas he is in
dissent. In contrast, under the negative method, the client is requested to answer only if the
amount disclosed is not certain. Thus, auditor should complete further work regarding to
those accounts receivable who reply and do not reply. For those clients that do not respond,
second request ought to be make in case of no answer being gotten within a month and it
essential this might be trailed by calling the client, with the customer's consent. After several
attempts to get confirmation, a responsible company official, ideally independent of the sales
accounting department will received a list of the outstanding items. There are also some
alternative procedures if client do not response. If there is an event demonstrate impossible to
get confirmations from individual clients, alternative procedures include check receipt of cash
after-date, verify valid purchase orders if any and examine the account to see if the balance
outstanding represents specific invoices and confirm their validity.