Acca aa s21 Notes

completeness
assertion; from 'book to physical' 
relates to the 
existence
assertion.
๏
Make a note of the last few goods received noted and dispatch notes of the year. This will be 
used later in cut-off tests.
๏
At the end of the count it is essential for the auditor to check that all inventory sheets are 
recovered to make sure that no inventory is left out of a count. 
September 2021 to June 2022 exams
Watch our free ACCA AA lectures
96

---

Only on 
OpenTuition
you can find: Free ACCA notes 
•
Free ACCA lectures 
•
Free ACCA tests 
•
Free ACCA tutor support 
•
The largest ACCA community
3. Inventory valuation
Inventory sheets show the physical quantity and perhaps description of the inventories only. There is 
no value there yet. After the stocktake it is important to value inventory. You should know from your 
earlier studies of financial reporting that cost may include:
๏
Purchase price - agreed to suppliers’ invoices
๏
Conversion costs (including production overheads) - agreed to costing records. There could be 
many calculations to do here. 
Value = Cost/unit x Quantity
The values of the individual items will be added up to form a grand total of the inventory. It’s very 
important that these calculations are checked, including the addition of the final column. Remember 
any value you like can be put in for closing inventory and the accounts will always balance, but for 
every dollar added to the value of closing inventory there is a dollar added to the reported profit. 
Management must now consider whether inventory identified as slow-moving, damaged or obsolete 
needs to be written down below cost. For retail goods, management would consider, for example, the 
selling prices of inventory after the year end. For inventory of a specialised nature, management and/
or the auditor may require the assistance of an expert (see Chapter 23).