Walk me through how you attend a client’s physical inventory count.

What the interviewer wants to hear

• Reviews count instructions in advance
• Observes whether staff follow procedures
• Performs test counts in both directions
• Checks cut-off and records last document numbers
• Notes damaged, obsolete or slow-moving items and follows up on final sheets

Model answer

Before the count, I review the client’s count instructions, the stock locations and any third-party warehouses, and plan where to focus based on value and risk. On the day, I observe whether counters follow the instructions: areas are marked, goods are not moved during the count, and two people count each area. I do test counts in both directions: from the floor to the count sheets for completeness, and from the sheets to the floor for existence. I record my test counts so I can check them against the final inventory listing. I note the last goods received note and dispatch note numbers to test cut-off later. I also look for damaged, expired or slow-moving goods, which may need to be written down to net realisable value. After the count, I trace my test counts and cut-off documents to the final valuation and investigate differences, as required by SA 501.

More medium Auditor questions

• You are planning the audit of a new client. How do you understand the business and assess risks?
• How do you run an external confirmation process for receivables, and what if customers do not reply?
• How do you design an audit sample, and what affects the sample size?
• How do you perform journal entry testing to address the risk of management override?
• How would you audit trade receivables at year end?
• Describe your audit approach for property, plant and equipment.
• How would you audit payroll expense for a company with 500 employees?
• Why and how would you reconcile revenue in the books with GST returns during an audit?
• What do you communicate to the audit committee during and at the end of an audit?