| A9. | For practical reasons, the physical inventory counting may be conducted at a date, or dates, other than the date of the financial statements. This may be done irrespective of whether management determines inventory quantities by an annual physical inventory counting or maintains a perpetual inventory system. In either case, the effectiveness of the design, implementation and maintenance of controls over changes in inventory determines whether the conduct of physical inventory counting at a date, or dates, other than the date of the financial statements is appropriate for audit purposes. ISA (UK and Ireland) 330 establishes requirements and provides guidance on substantive procedures performed at an interim date.6 |
| A10. | Where a perpetual inventory system is maintained, management may perform physical counts or other tests to ascertain the reliability of inventory quantity information included in the entity's perpetual inventory records. In some cases, management or the auditor may identify differences between the perpetual inventory records and actual physical inventory quantities on hand; this may indicate that the controls over changes in inventory are not operating effectively. |
| A11. | Relevant matters for consideration when designing audit procedures to obtain audit evidence about whether changes in inventory amounts between the count date, or dates, and the final inventory records are properly recorded include: |
| Whether the perpetual inventory records are properly adjusted. |
| Reliability of the entity's perpetual inventory records. |
| Reasons for significant differences between the information obtained during the physical count and the perpetual inventory records. |
| 6 ISA (UK and Ireland) 330, paragraphs 22-23. |
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