Verify that the stock take exercise is carried out per the stock instructions. This will assure the auditor that the exercise can be relied upon to provide complete and accurate figures of the stock balance;
To verify the physical existence of the stock;
To inspect the general condition of the stock, this will assist in concluding whether the stock is correctly valued.
Note that the auditor does not attend the stock take to count stock but to observe how the exercise is being carried out.
The procedures to be followed during the count vary according to the size and circumstances of the business, nature of its stock and its stock records. Define instructions preferably in writing should be issued in all cases for the guidance of those who will be engaged in the actual stock taking. The instructions should contain:
i. Identification of the sock items and their ownership.
ii. Counting, weighing or measuring.
iii. Reporting of stocks which are damaged or defective. The following issues should be addressed:
• Stock taking should be well planned and carried out systematically by persons who are fully informed of the duties involved.
• These persons should be familiar with the stock but supervisors should be from different departments. Counting should be done by at least two people, one to count and the other to check and record what has been counted.
• Stocks should be marked to facilitate counting. The whole stock taking area should be divided into sections for control purposes and avoids double counting.
• Ensure that properly qualified personnel are available where specialized knowledge is necessary to identify, quality and quantity of stock.