Quantity of an inventory item as per records was 4 lakhs units as on the year-end date. Auditor was present during the inventory count at the year-end date and he noticed that only 350,000 units were there during count. Management explains that there might be counting error because the record was correct and reconciled with opening stock, purchases and sales.

Certain audit evidences are more reliable than the other audit evidences. Stock quantity as recorded in the stock ledger was reconciled with opening stock, purchases and sales. But on physical verification, stock quantity was found to be short. Since the auditor himself has observed that stock quantity as per physical verification is lower than the quantity as per record, the evidence as per self-verification of the auditor should be considered as more reliable than the recorded information. The auditor should consider whether to conclude based on the evidence he/she has in hand or go further corrective evidence.

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