INVENTORY OBSERVATION CHECKLIST

PURPOSE
This checklist is designed to help the auditor obtain an understanding of the clients physical count of inventory, including:

The procedures and instructions for the physical count. Verification of the physical counts. Supervision by responsible employees. Reconciliations of the physical counts. Controls over count sheets or inventory tags. Cutoff procedures for shipping and receiving.

INSTRUCTIONS
The auditor should answer the questions and use the additional space provided after each question to include further explanation or comments. Completion of this checklist necessitates that the answer to each question be supplemented by additional comments in the space provided, since Yes, No, or N/A generally would not be considered sufficient.

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INVENTORY OBSERVATION CHECKLIST

CLIENT NAME: DATE OF FINANCIAL STATEMENTS: PT SABTU MINGGU 31 DESEMBER 2011

1.

Summarize below the locations of the inventory, the date the client will be counting the inventory, the name of the client personnel in charge, and the percentage of inventory at each location in relation to the total inventory. Location Date of Count 01 January 2012 Client Personnel in Charge Bapak Anto Percentage of Total Inventory

PT SABTU MINGGUs warehouse (jalan Soekarno Hatta)

2.

Do adequate detailed written inventory instructions and procedures exist? If yes, attach a copy. [comment row]

Yes No N/A

3.

Do inventory procedures give appropriate consideration to the location and arrangement of inventories? Describe. [comment row] Yes, based on result of inquire of management.

Yes No N/A

4.

Do inventory procedures give appropriate consideration to identification and description of inventories? Describe. [comment row] Yes, based on our review and result of inquire of management.

Yes No N/A

5.

Is the method of determining inventory quantities specified (e.g., weight or count)? Describe. [comment row] Yes, because method for counting inventory understandability. The method is inventory put in classification.

Yes No N/A

6.

Is the method used for recording items counted (e.g., count sheets, prenumbered tags) adequate? Describe. [comment row] Yes, because in inventory tag there are full information inventory describe like: name of goods, code of goods, quantity of goods, and notes for inventory in and out.

Yes No N/A

7.

Are inventory tags used? If yes: a. b. Are they prenumbered? Is accounting for inventory tags adequate, and does it include control with respect to tags used, unused, and voided? Describe.

Yes No N/A Yes No N/A Yes No N/A

[comment row] Yes, client use inventory tag. Control in inventory tag is enough because there are full information inventory describe like: name of goods, code of goods, quantity of goods, and notes for inventory in and out in every

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inventory tag. 8. Are adequate procedures in place to identify inventory counted, ensure that all items have been counted, and prevent double counting? Describe. [comment row] Yes, because inventory tag already use and prenumbered. 9. Are obsolete, slow-moving, or damaged inventories properly identified and segregated? Describe. [comment row] Client separate inventory which slow moving and obsolete inventory put in the back warehouse and fast moving inventory put in the front warehouse. 10. Is the inventory reasonably identifiable for proper classification in the accounting records (e.g., description, stage of completion)? Describe. [comment row] every inventory tag has full informations about classification of inventories. 11. Are inventory counts subject to: a. b. c. Complete recounts by persons independent of the ones involved in the initial counts? Recounts only of merchandise having substantial value? Spot checks by supervisory personnel?

Yes No N/A

Yes No N/A

Yes No N/A

Yes No N/A Yes No N/A Yes No N/A Yes No N/A

[comment row] ] From clients organizational structure, logistics division only organize about inventory. 12. Are counts performed by employees whose functions are independent of the physical custody of inventories and recordkeeping functions? Describe. [comment row] From clients organizational structure, logistics division only organize about inventory. 13. Do proper accounting controls and procedures exist for the exclusion from inventory of merchandise on hand, which is not property of the client (e.g., customers merchandise and consignments in)? Describe. [comment row] because there is no consignment inventories in clients warehouse. 14. Do proper accounting controls and procedures exist for the inclusion in inventory of merchandise that is not on hand but is the property of the client (e.g., merchandise in warehouses; out on repair, and consignments out)? Describe. [comment row] ]because there is no consignment inventories in clients warehouse. 15. Will identical inventory items in various areas be accumulated to allow a tie in total counts to a summary listing subsequent to the observation? Describe. [comment row] 16. Is the movement of inventory adequately controlled (e.g., shipping and receiving activities suspended) during the physical count to ensure a proper cutoff? [comment row] when client do stock taking, no activities for in or out inventory.

Yes No N/A

Yes No N/A

Yes No N/A

Yes No N/A

Yes No N/A

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17. Are significant differences between physical counts and detailed inventory records investigated before the accounting and inventory records are adjusted to match the physical counts? Describe. [comment row] Selendang batik already packing to PT Buana but clients customer not yet take the goods. 18. Will the client be using the services of a specialist? If yes, describe the arrangements that have been made. [comment row] 19. Will inventory at remote locations be counted? Describe. [comment row] no because PT SABTU MINGGU only have one warehouse 20. Will special counting procedures or volume conversions be necessary (e.g., items weighed on scale)? Describe. [comment row] Client inventory only finish goods. There is no raw material and work in process on clients warehouse. 21. How will work-in-process inventory be identified? Describe. [comment row] because client is trading company. 22. How will the stage of completion of work-in-process inventory be identified? Describe. [comment row] because client just selling finish goods. 23. Describe any other matters that should be noted for the inventory count. [comment row] We make adjustment for inventory which have significant different between cost and selling price.

Yes No N/A

Yes No N/A

Yes No N/A Yes No N/A

Yes No N/A Yes No N/A

Yes No N/A

Performed by: Reviewed by:

Vynica&claudia

Date: Date:

2 april 2013

Updated in subsequent years as follows: Year Updated by Date

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