What are the alternative inventory audit procedures?

Being able to verify and know the reality of the merchandise that we have in our company, it is essential to count them and verify with the supports; since it allows us to know if a loss or theft has occurred, however sometimes it is impossible to perform the physical count and we must resort to alternative inventory audit procedures .

In this sense, the alternative procedures will allow the auditors to carry out a series of steps or guidelines that are not the common ones, to determine or be able to show the results ; because it is impossible to do it in the traditional way for various reasons or factors.

In the case of inventory, it refers to all materials, either for raw materials, products in process or already prepared for sale; We can also say tangible, corporeal or existing goods, which are vital to the functionality of the organization.

As not all inventory control systems are the same, since it depends mainly on the economic activity to which the company is engaged, audits cannot be carried out only in one way; In this sense, depending on the type of organization, it will be necessary to use alternative procedures in order to obtain a detailed report of the current situation.

Alternative inventory procedures

There are some types of internal or external administrative audits that will help to know the current state of the company; and in case the inventory makes traditional use difficult, alternative procedures should be used, since this will facilitate the work.

Normally it is necessary to evaluate all the items and verify them against the physical inventory. However, sometimes it is impossible to do so; Either by nature or by its location, then the only possibility is to do it through an alternative procedure.

To carry out an alternative procedure, you can take a sample of the purchased inventory items and inspect all the sales documents after those purchases ; In this sense, it is essential to observe and consider any detail no matter how insignificant it may seem.

On the other hand, the auditor can also verify all the supports of the purchases made for a period , and thus establish the constant in the acquisition of merchandise, always respecting and following the international auditing standards.

Regardless of which alternative method or procedure is used to obtain the results, this type of audit will provide the information that the company needs ; since it is possible to elucidate the current state of the merchandise and solve any problem that is found.

How to plan alternative audit procedures?

When planning either a traditional or an alternative audit procedure there are a few things to consider; such as the nature of the accounting systems , as well as the internal control used for the inventory system.

It is also essential to take into account the importance, risk and detection that is related to the inventory ; as well as the locality or physical location, and establish whether or not it is necessary to call an expert, all according to international auditing standards.

It is relevant to take into account that it is not always possible to have sufficient evidence of the current state of the inventory, when carrying out an alternative audit procedure; due to several factors, including their reality or situation, which is mainly summarized in not having the true data .

The different procedures for inventories can be carried out depending on the case by people inside or outside the organization, for them it is essential to know the differences and relationship between internal and external audit ; basically in this way it will be possible to understand when and where each one is necessary.

Finally, if a physical count or alternative procedure cannot be done for multiple reasons; then the auditor should always adhere to regulation or ISA 705, and clearly express a modified opinion on the various scope limitations.

 

by Abdullah Sam
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