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The company I am auditing has shown Inventory l...

The company I am auditing has shown Inventory lying with subcontractor for fabrication. How shoul...

The company I am auditing has shown Inventory lying with subcontractor for fabrication. How should I verify it?

0
Chiranjibi Chapagain Mar. 12, 2018

You can consider the following checklist for verifying inventory lying with sub contractors for fabrication:

  • The inventory lying with the sub contractor for processing should be confirmed by the confirmation letter obtained from the sub contractors.
  • The necessity of holding inventory by them should be vouched. If the inventory is lying with them for long, the reason for the same should be ascertained. The condition of the inventory should be confirmed by the management.
  • The inventory should be valued at cost or net realizable value, whichever is less. The processing charges incurred should be added to the cost. The provision for the liability towards unpaid processing charges should be created.
  • The inventory should be disclosed under the head current assets under the sub head inventory.
  • Adjustment in accounts should be made for any discrepancies between inventory confirmed and inventory sent out as per memorandum records.

The company I am auditing has shown Inventory lying with subcontractor for fabrication. How should I verify it?

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