I almost failed my practice review from MIA because of the attendance of physical inventory counting as per ISA 501 Audit Evidence – Additional Consideration for Specific Items.

Here’s what happened on my first practice review in 2007.

“For two of the engagements selected for review, no observation of inventory counts was performed at the financial year-end.

For another engagement, documentation was only available for raw materials and packaging materials, with no explanation for the non-observation of work-in-progress and finished goods, which made up over 80% of closing stocks.

There were no working papers to verify the quantity and condition of inventories or alternative audit procedures when attendance at inventory counts was not possible.

The available working papers were just copies of clients’ inventory listings and stock certificates.

This meant KTP might not have obtained sufficient audit evidence on the existence and condition of inventories as required by ISA 501 – Part A.

In such cases, a limitation on the scope of work could warrant a qualified opinion per ISA 700(43) which KTP don’t do!”

Ever since, I have been very strict on attendance of stock take.

Some new transferred clients tell us KTP are so troublesome compared to their ex-auditor, where there was no stock take or minimal stock take.

I shall my above story with them. Some accept. Some don’t which we have to resign with no choice!

This is evidenced by our recent training with newcomers conducted by my manager on the SOP of stock take. Watch the full 60 minutes training in our YouTube https://lnkd.in/gfaQWqPg

Why am I sharing this?

Because the importance of stocktake for auditors at balance sheet date as per ISA 501 cannot be overstated.

Because practice review from MIA will look at the auditor role in stocktake.