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a) Stock take instruction are issued to the staff undertaking the stock take to brief them on the procedures to be followed during the count. Definite instructions preferably in writing should be issued in all cases for the guidance of those who will be engaged in the actual stock taking. The instructions should contain:
a. The method of identification of the stock items and their ownership;
b. Counting, weighing or measuring.
c. Reporting of stocks which are damaged/defective.
The following issues should be addressed:
- Stocktaking should be well planned and carried out systematically by persons who are fully informed of the duties involved;
- These persons should be familiar with the stock but supervisors should be from different departments;
- Counting should be done by at least two people, one to count and the other to check and record what has been counted;
- Stocks should be marked to facilitate counting and avoid double counting;
- The whole stock taking area should be divided into sections for control purposes and avoids double counting.
- Ensure that properly qualified personnel are available where specialised knowledge is necessary to identify, quality and quantity of stock.
- Cut off procedures should be performed i.e. dispatch documents for all goods belonging to customers and still held by client and those that have already passed to the customer. Such stock should be excluded from the stock take.
- Goods held in safe custody for others should not be recorded as part of the client‘s stock.
- Arrangements to confirm the goods held for the company by outside parties should be made.
- There should be procedures to identify the slow moving and obsolete/damaged stock.
- There should be procedures for identification of the stage of completion of work in progress.
b) Work to be performed and matters to consider during the count
The main task is to ascertain whether the client‘s employees are carrying out their instructions properly so as to provide reasonable assurance that the stock take was accurate and not necessarily to count stock. This will be achieved by observing the way the count is conducted and also carrying out sample counts. When carrying out the sample counts the auditor should pick items from the shelves count these and compare the results with what was obtained by the count team. The following procedures should be carried out:
- He should make notes for follow up purposes of items counted in his presence, details of damaged, obsolete or slow moving items.
- He should find out the methods of identifying slow moving obsolete or damaged stock.
- Record fully the work done and his impression of the stock take exercise.
- He must form a conclusion as to whether the stock take can be relied on.
- Get photocopies of rough stock sheets.
- Get details of the sequence of the stock sheets.
- Pay special attention to high value items during his sample tests;
- If the auditor is not satisfied about the way stock taking was conducted he should inform management and may request a recount.
Wilfykil answered the question on February 21, 2019 at 07:23
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