ICAI Advisory – Physical Inventory Verification & Key Audit Considerations amid COVID-19

Physical verification of inventory is the responsibility of management of the entity. Management is required to establish procedures under which inventory is physically counted. This should be done at least once a year to ensure:

• existence,
• condition and
• support valuation of inventory.

The Companies (Auditor’s Report) Order, 2016 (CARO 2016) also requires auditors to comment on “Whether physical verification of inventory has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so, whether they have been properly dealt with in the books of account”.

SA 500, “Audit Evidence” prescribes that the objective of the auditor is to design and perform audit procedures in such a way as to enable the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable conclusions on which to base the auditor’s opinion.

Recently ICAI has issued an advisory on Physical Inventory Verification & Key Audit Considerations amid COVID-19.

The Advisory is enclosed below for your kind referance.

ICAI Advisory