The Life of Audit Sampling Techniques to Test Inventory

Windsor, Sean, Journal of Accountancy

THE USE OF AUDIT SAMPLING TECHNIQUES TO TEST INVENTORY

Although audit sampling is a useful technique, practitioners often have problems using Statement on Auditing Standards no. 39, Audit Sampling, to test inventory substantively. This article identifies some of the problems and possible solutions.

PHYSICAL INVENTORY

OBSERVATION

Consider the case of Company X, a manufacturer that is being audited. Company X's fiscal yearend is December 31. However, it will not take a physical inventory until January 31. Therefore, the auditor will have to test the company's rollback to December 31.

It is important for the auditor to observe the physical inventory of Company X. To determine if the client is correctly counting the inventory, the auditor select 30 inventory tags from the 250 used and recounts the related inventory. The auditor finds 3 tags with errors. An investigation of the …

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Publication information: Article title: The Life of Audit Sampling Techniques to Test Inventory. Contributors: Windsor, Sean - Author. Journal title: Journal of Accountancy. Volume: 171. Issue: 1 Publication date: January 1991. Page number: 107+. © 2009 American Institute of CPA's. COPYRIGHT 1991 Gale Group.

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