W. P. No.

E-APG

Inventory Audit Program Auditor

Date 9/00

Process description: Purchasing and Disbursements.

Audit Objective
1) all inventory items exist and owned by the Company (existence, completeness, and ownership);
2) inventories stated at the lower of cost determined by LIFO method, or market (valuation);
3) inventory items are properly classified and disclosed (presentation, and disclosure).
Done by and Work paper
date
1. perform test of controls of the purchasing and disbursement process.
2. review a written narratives related to the standard cost accounting system and
the control procedures related to the audit objectives.
3. perform an inventory observation of raw materials, finished goods, and
purchased components on July 25. AUDITOR will then agree the counts into
the July inventory detail and reconcile to the July 2000 financial statements
4. AUDITOR will obtain inventory lead sheet from the client including current
and prior year balances and perform a detailed top-side analytical review of the
changes which occurred from the prior year
5. After each year end the Company re-values its inventory to a new standard.
This standard is amortized over the 12 months of the new fiscal year.
AUDITOR will review the client’s calculation of the revaluation amount and
compare it to the prior year. AUDITOR will investigate and document the
reasons for the changes, if significant.
6. AUDITOR will perform price testing procedures on 10 judgmentally selected
raw materials and finished goods. These procedures will include ensuring
variances are accounted for properly.
7. AUDITOR will obtain a documentation of the client method of calculating its
LIFO reserve and review for reasonableness
8. AUDITOR will perform substantive testwork to review the client’s LIFO
calculation for year end and the related adjustments
9. AUDITOR will determine the appropriateness of the Company’s
obsolescence/excess reserve based on the specific reserve identified and a
general reserve calculated based on historical trends
10 AUDITOR will review the Inventory Usage Report as of year end to determine
. if there are any potential obsolescence issues with the appropriate client
personnel

Lgl_APG.doc