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Audit Program For Inventories

Audit Program For Inventories Template for New Zealand

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Key Requirements PROMPT example:

Audit Program For Inventories

"I need an Audit Program For Inventories for a multi-location retail company in New Zealand with both physical stores and e-commerce operations, focusing particularly on cycle counting procedures and automated inventory systems integration for implementation in March 2025."

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Document background
The Audit Program For Inventories is a crucial document designed to guide auditors through the systematic examination of a client's inventory accounts and related controls. It is essential for ensuring compliance with New Zealand's auditing standards, particularly the International Standards on Auditing (New Zealand) and the Financial Reporting Act 2013. This program is typically implemented when conducting annual audits or special inventory reviews, and becomes particularly important for entities where inventory represents a material component of their financial statements. The document provides comprehensive procedures for risk assessment, physical count observation, valuation testing, and documentation requirements, while considering specific New Zealand regulatory and business context. It serves as a quality control tool to ensure consistent and thorough audit approaches across different engagements while meeting the requirements of the New Zealand External Reporting Board (XRB) and other relevant regulatory bodies.
Suggested Sections

1. 1. Purpose and Scope: Defines the objectives of the audit program and its scope regarding inventory examination

2. 2. Risk Assessment: Identifies and evaluates risks related to inventory assertions, including fraud risks and control risks

3. 3. Planning Procedures: Details the preliminary planning steps, including understanding the client's inventory system and determining materiality

4. 4. Internal Control Assessment: Procedures for evaluating the design and implementation of internal controls over inventory

5. 5. Physical Inventory Count Procedures: Detailed steps for observing and testing physical inventory counts

6. 6. Inventory Valuation Procedures: Steps to verify the proper valuation of inventory items, including cost and net realizable value testing

7. 7. Cut-off Testing Procedures: Procedures to ensure proper recording of inventory transactions at period end

8. 8. Analytical Procedures: Guidelines for performing analytical reviews of inventory balances and movements

9. 9. Documentation Requirements: Specifies the required working papers and evidence to support audit conclusions

10. 10. Reporting Requirements: Guidelines for communicating findings and preparing audit conclusions

Optional Sections

1. Specialized Industry Considerations: Additional procedures specific to certain industries (e.g., manufacturing, retail, pharmaceuticals)

2. IT System Testing Procedures: For clients using complex inventory management systems or automated warehouses

3. Foreign Currency Considerations: For inventory purchased or valued in foreign currencies

4. Consignment Inventory Procedures: For businesses with significant consignment arrangements

5. Work-in-Progress Procedures: Detailed procedures for manufacturing entities with significant WIP

6. Multiple Location Procedures: For entities with inventory stored at multiple locations

7. Third-Party Warehouse Procedures: For inventory held by third-party logistics providers

Suggested Schedules

1. Appendix A: Risk Assessment Checklist: Detailed checklist for identifying and assessing inventory-related risks

2. Appendix B: Internal Control Questionnaire: Comprehensive questionnaire for evaluating inventory control systems

3. Appendix C: Physical Count Instructions: Detailed instructions and forms for conducting physical inventory counts

4. Appendix D: Sampling Methodology: Guidelines and tables for determining sample sizes and selection methods

5. Appendix E: Inventory Pricing Tests: Templates for testing inventory cost calculations and price testing

6. Appendix F: Analytical Review Templates: Standard templates for performing inventory analytical procedures

7. Appendix G: Working Paper Templates: Standard forms and templates for documenting audit procedures

8. Schedule 1: Materiality Calculations: Worksheets for calculating materiality levels for inventory

9. Schedule 2: Key Control Points: Listing of key control points in the inventory cycle

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Audit Evidence
Audit Procedures
Audit Risk
Control Risk
Cost Formula
Cut-off Date
Detection Risk
FIFO
Finished Goods
Inherent Risk
Internal Control
Inventory
Inventory Count
Inventory Records
Management Assertions
Material Misstatement
Materiality
Net Realizable Value
Observation
Perpetual Inventory System
Physical Count
Raw Materials
Sample
Sampling Risk
Standard Cost
Stock Count
Test Count
Test of Controls
Trading Stock
Transaction Testing
Valuation Method
Warehouse Location
Weighted Average Cost
Work in Progress
Working Papers
Clauses
Scope and Objectives
Risk Assessment
Professional Standards Compliance
Independence Requirements
Confidentiality
Documentation Requirements
Quality Control
Sampling Methodology
Physical Count Procedures
Valuation Testing
Cut-off Procedures
Internal Control Testing
Analytical Procedures
Fraud Risk Assessment
Expert Consultation
Technology Usage
Record Retention
Reporting Requirements
Communication Protocols
Health and Safety
Access Rights
Data Protection
Working Papers Requirements
Review Procedures
Materiality Assessment
Third-Party Confirmations
Staff Responsibilities
Timeline Requirements
Resource Allocation
Dispute Resolution
Relevant Industries

Manufacturing

Retail

Wholesale Trade

Agriculture

Pharmaceutical

Automotive

Food and Beverage

Electronics

Construction

Mining

Textile

Chemical Industry

Consumer Goods

E-commerce

Relevant Teams

Audit

Internal Audit

Finance

Accounting

Inventory Control

Warehouse Operations

Supply Chain

Quality Assurance

Risk Management

Compliance

Relevant Roles

Audit Partner

Audit Manager

Senior Auditor

Staff Auditor

Internal Audit Director

Internal Auditor

Financial Controller

Chief Financial Officer

Inventory Manager

Warehouse Manager

Supply Chain Manager

Quality Assurance Manager

Compliance Officer

Risk Manager

Industries
Financial Reporting Act 2013: Establishes the framework for financial reporting in New Zealand, including requirements for inventory valuation and disclosure in financial statements
Companies Act 1993: Sets out fundamental requirements for company records, including the maintenance of proper accounting records which necessarily include inventory records
New Zealand International Financial Reporting Standards (NZ IFRS): Contains specific requirements for inventory measurement and disclosure, particularly NZ IAS 2 Inventories
Income Tax Act 2007: Contains provisions relating to the tax treatment of trading stock (inventory) and its valuation methods for tax purposes
Auditor Regulation Act 2011: Regulates auditors and sets requirements for conducting audits in New Zealand
International Standards on Auditing (New Zealand) (ISAs (NZ)): Professional standards that govern how audits should be conducted, including specific guidance on auditing inventories
Professional and Ethical Standard 1: Sets out the fundamental principles of professional ethics for auditors in New Zealand
Goods and Services Tax Act 1985: Relevant for GST implications on inventory transactions and valuations
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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