Acca aa s21 Notes

2. Year-end physical inventory counts ('stocktake')
The main aspects of the stocktake include the following:
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Instructions. Remember, many stocktakes will take place only once a year and the procedures 
are therefore not that well-known or practised by many staff members. It’s very important that 
there is careful advance planning. Instructions have to be given out. Staff members have to be 
briefed. There may be training sessions. 
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Preparation of the count area. The inventory area has to be prepared by tidying and sorting 
items. It’s important that slow-moving, damaged, old and third-party inventories can be 
identified. 
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Pre-number each inventory location. All the shelves or inventory locations should be pre-
numbered, ideally sequentially. Labels are often attached and the labels will have a number. 
They will describe the inventory location. They may have space in which the type and quantity 
of inventory can be recorded and there should be one or two spaces on the label which are 
signed off once the items have been counted and checked.
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Sequentially pre-numbered inventory sheets. The inventory is going to be listed on inventory 
sheets and it’s essential that these are sequentially pre-numbered in order to check that all 
inventory sheets have been returned and that the inventory is therefore likely to be complete. 
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Count teams. Inventory counters or stocktakers will often work in pairs. Staff who work in the 
warehouse should not count or record inventories for which they are responsible, but staff who 
do not work in the warehouse may be unfamiliar with what they are seeing and counting. 
Probably the best solution is to have a mixed team. One person from the warehouse who knows 
about the inventory and one who is independent and who is less likely to alter inventory counts 
to cover up errors. They go round together, one will count, one will check. They sign off and 
mark each location as it is counted so that that inventory wouldn’t be counted twice. They mark 
the inventory location number on the stock sheets and the stock sheet numbers on the location 
label so that items can be later checked.
Note that it is 
not
the responsibility of auditors to carry out the stocktake: it is their job to decide if the 
stocktake can be relied upon. What the auditors should do is:
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Look at the instructions that are issued in advance and identify any shortcomings for discussion 
with management. 
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On the stocktaking day , to observe and evaluate the conduct of the count.
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The auditor will make some counts himself, noting down the description of the items, the 
quantity, and the location. They will also note down the number of the stock sheet in which that 
inventory item should be recorded. 
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At some stage the auditor will have to make test checks on the accuracy of the count. The 
auditor will count some inventory quantities on the shelves and trace this to the inventory 
sheets and will then pick some items on the inventory sheets and go back to the inventory 
location and count the amount which is actually there to make sure that it agrees. Testing from 
'physical to book' quantities relates to the