How Can Auditors Test Inventory Without A Site Visit
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We learned this week that physical inventory count is so important that auditing standards made it a required audit procedure. Then what happens when it becomes impossible for auditors to access inventory physically? As we know, that is not a hypothetical question anymore. The below articles from Journal of Accountancy and KPMG describes the problem and presents alternative methods auditors are using to overcome the new challenge.
Article 1: How auditors can test inventory without a site visit (Journal of Accountancy) https://www.journalofaccountancy.com/news/2020/mar/auditing-how-to-observe-inventory-during-coronavirus-pandemic.html
Article 2: Physical inventory count amid COVID-19 (KPMG) https://assets.kpmg/content/dam/kpmg/in/pdf/2020/03/chapter-2-aau-covid-19-financial-reporting-inventory-impact-relaxations.pdf
The articles present an 1) alternative procedure that the auditors can use if it is not possible to conduct physical inventory (conducting physical count and rollforward (or rollback)) and an 2) alternative tool that auditors can use if the company is conducting the physical count but the auditor cannot be present in the premise (Video Observation).
1. Discuss the advantage and disadvantage of each method.
2. There are a lot of discussions in the world about how some things we adopted during the pandemic are going to become ‘new-normal’. Do you think video observation is here to stay in post-COVID era? Explain your position.
In addition to addressing the above questions, you can also discuss any additional topic or ask questions to one another. Your initial post should be approximately 200-300 words.
Responding to Others
Responses to at least two classmates’ postings should be approximately 200 words and should be thoughtful, substantial, polite and more extensive than a simple “well done” phrase or “I agree.” Consider points of agreement, disagreement, assumptions, and value judgments. You will be able to respond to others after you submit your initial post.