Audit Program - Inventory Procedure Review the numerical sequence of inventory purchase requisitions. A missing requisition could indicate that unauthorized purchases were made. Trace the receiving and shipping cutoffs obtained during the observation to the inventory records, accounts receivable records, and accounts payable records. Also, trace inventory to production and sales. Check that the procedures for accounting for all inventory tags and count sheets are followed and that all such tags and sheets have been completely accounted for. Trace test counts of inventory items from the floor to the client's inventory listing. This ensures that all items of inventory have been counted and included in the inventory balance. Vouch selected inventory requisitions to customer or department order. This helps to obtain evidence that all requisitions are valid. Review the effects of sales and purchase cutoff tests on inventories. This is to confirm that ending inventory is properly valued and inventory transactions are recorded in the proper time period. Enquire of client management regarding the existence of consigned inventories. If a consignee holds a portion of the client's inventory, confirm that amount with the consignee. If a client consignee holds a portion of a consignor's inventory, confirm that amount with the consignor. Confirm inventory held at public warehouses by direct written confirmation with the public warehouse. If inventory at public warehouse is significant, review client's procedures for investigating and evaluating the warehouse. Obtain a report from the warehouse's auditor regarding internal control, and if practical, observe the warehouse's physical counts. Inquire about methods of pricing in the prior period and vouch selected prices to vendor's invoices, price lists or cost sheets. This confirms the proper inventory value. Test the client's application of their inventory valuation method (FIFO or LIFO) and the lower-of-cost-or-market rule. This done so there is the proper inventory value is on the financial statements. If there are any losses, they are recognized and disclosed. Determine whether allowances have been made for scrap, obsolete, unsalable, slow- moving, or overstocked items by reviewing perpetual records, sales analysis and other information to determining actual usage of the items during the year. Perform analytic procedures to test inventory reasonableness by comparing cost of goods sold, gross margins or inventory turnover with previous years. Investigate where significant fluctuations exist. Assertion(s) Tested Completeness