Ministry of Finance, Specific Independent Audit Guidelines No. 26: Attendance at Physical Inventory Counting

Issued: March 5 2002
Effective: July 1 2002
Applicability: For the purposes of the Guidelines, "attendance at physical inventory counting" refers to the attendance of a certified accountant at the physical inventory counting of the work unit that is being audited to supervise the process and take samples to verify the reliability of the inventory counting (Article 2).

Main contents: In planning his/her attendance at a physical inventory counting process, the accountant shall consider the nature of the inventory and the physical inventory counting procedures and the effectiveness of internal inventory control of the work unit that is being audited (Article 4). This attendance plan shall include the objective, scope and timing of the attendance, the focus of attention and the scope of the samples taken (Article 9). Before the inventory counting, the accountant shall determine that all items that are to be inventoried are properly arranged and identified (Article 10). The accountant shall observe whether the inventory plan formulated by the work unit is complied with and whether an accurate record is kept during the inventory process (Article 12). Samples shall be taken to verify the accuracy and completeness of the inventory count (Article 14). The accountant shall conduct a post-inventory inspection to determine whether the inventory has been carried out (Article 19). Where attendance is impracticable, due to factors such as the nature and location of the inventory, the accountant shall consider whether alternative audit procedures, such as inspection of the relevant purchase and sales documentation, can be used to obtain sufficient and appropriate audit evidence (Article 24). If the accountant cannot attend the physical inventory count in person and no alternative procedures can be implemented, the accountant shall issue a qualified opinion or a disclaimer of opinion (Article 29).
Related legislation: Independent Audits Basic Guidelines