Inventory is a key asset in a company’s financial statements as it can be used as collateral for bank loans and also can be misappropriated for fraudulent reporting purposes. Companies typically put in place internal controls such as a custodian of inventory or a segregation of duties between the custodian of inventory and the individual with access to the perpetual records to reduce risks of inventory fraud and misappropriation.
In an inventory audit, the auditor uses several analytical procedures to check the company’s inventory methods and confirm that the financial records and actual physical count of goods match. An inventory audit is considered a generally accepted auditing procedure.
Recall the four assertions related to account balances. Inventory is a balance sheet account and so the relevant assertions are existence, rights, completeness, and valuation. Existence refers to whether the inventory is actually present, rights refers to whether the company undergoing the audit actually owns the rights to the goods, valuation refers to the correct pricing as well as any impairment issues, and finally, completeness addresses whether all the goods that should be recorded are fully recorded.
A forensic audit is an examination and evaluation of a firm’s or individual’s financial records to derive evidence that can be used in a court of law or legal proceeding.
- A forensic audit is an examination and evaluation of a firm’s or individual’s financial records to derive evidence that can be used in a legal proceeding.
- A forensic audit may be conducted to prosecute a party for fraud, embezzlement, or another criminal behavior.
- Forensic auditing is an accounting specialty; only large accounting firms have a forensic auditing department.
We have a specialised Forensic Department to uncover any financial fraud and cater your need since forensic audits require the expertise of accounting and auditing procedures as well as expert knowledge about the legal framework of such an audit.