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Inventory Tasksheet Assignment

Assignment Task

Required:

In this activity, you are required to complete three tasks in sequential order.

Task 1

Based on the information provided above, you are required to:

  • Make preliminary inherent and control risk assessments for the inventory account
  • Record your responses in the Risk Assessment Template provided on LMS

Task 2

Nigel Stewart maintains an Inventory Movement Register. Nigel draws upon weekly sales reports and weekly supplier invoices to update the register and track the weekly movement in inventory. At the end of each month, Nigel generally reconciles the end-of-month balance with the physical stocktake.

On your request, Nigel provides you with an extract from the Inventory Movement Register. You note that Nigel has also computed the end-of-month inventory valuation in the extract provided for audit purposes. However, Nigel hasn’t reconciled the end-ofmonth inventory balance with the physical stock take. Nigel also provides you with the supporting documentation used when compiling the inventory movement.

The documents provided include:

  • Extract from the Inventory Movement Register
  • Supporting documentation:

– Supplier Invoices, Purchase Orders and Goods Received Notes for the sample period– Weekly sales reports

 Note: The accuracy of these reports has already been confirmed as part of the audit of Sales account – Inventory cost ∗ i.e. agreed prices with the suppliers

Based on the above information, you are required to:

  • Review the extract from the Inventory Movement Register prepared by the Store Manager.
  • Complete the reconciliation of the end-of-month inventory balance and physical stock count. Identify and investigate any discrepancies (i.e., identify misstatements, if any).
  • Examine the supporting evidence used to prepare the Inventory Movement Register, and identify discrepancies (i.e., identify misstatements, if any). © 2022 UWA Business School. All rights reserved.

You will report your findings in the answer template provided. You are required to:

  • List and briefly describe the identified misstatements. For each type of error, list all instances where the misstatement has occurred. (The same type of error may have multiple instances, across different products, but it is considered the same error.)
  • Determine the financial implication of the misstatements to the Inventory and related account balances (i.e., accounts payable, cost of sales, and loss due to write-down of inventory)
  • Design substantive tests that would have been necessary to identify these errors. Show up to two substantive tests in the designated column in the Excel template.
  • Provide the necessary rectification journal entry.

Task 3

Now that you have reviewed the documentation in Task 2 and have a better understanding of the misstatements in the inventory and related accounts, you are required to:

  • Reassess the inherent and control risk of the inventory account
  • Record your responses in the Risk Assessment Template section within the answer template