Auditing Inventory: Substantive Analytical Procedures Explained скачать в хорошем качестве

Auditing Inventory: Substantive Analytical Procedures Explained

This session explains analytical procedures related to the inventory and warehousing cycle in auditing. Professor Farhat covers common analytical procedures such as gross margin percentage, inventory turnover, unit cost comparison, extended inventory value, and manufacturing cost analysis. Learn how these procedures help identify unusual fluctuations and potential issues in inventory and cost of goods sold. This video is relevant for auditing students and CPA exam candidates. ✔️Accounting students or CPA Exam candidates, check my website for additional resources: https://farhatlectures.com/ 00:00 Introduction: Analytical Procedures in Auditing 00:54 Tools for Analytical Procedures: Ratios & Analysis 01:51 When Are Analytical Procedures Used in Auditing? 03:36 Analytical Procedures for Inventory: Overview 04:36 Gross Margin Percentage: Year-to-Year Comparison 06:11 Investigating Changes in Gross Margin 08:06 Cost of Goods Sold vs. Ending Inventory Relationship 08:57 Inventory Turnover Ratio: Meaning & Importance 10:21 Causes for Changes in Inventory Turnover 11:31 Unit Cost Comparison: Year-to-Year Analysis 13:01 Extended Inventory Value Comparison 14:00 Manufacturing Cost Analysis: Comparing Years 15:33 Conclusion & Key Takeaways Learn about substantive analytical procedures used in auditing the inventory and warehousing cycle. This video details key ratios and comparisons, including gross margin, inventory turnover, and unit costs, to help auditors identify potential misstatements. Understand how to analyze changes in inventory value and manufacturing costs from year to year. A detailed explanation of analytical procedures for the inventory and warehousing cycle, a crucial part of the auditing process. This lecture covers the application of ratio analysis and comparisons to prior years for identifying risks and potential errors in inventory and cost of goods sold. Ideal for accounting students and CPA exam preparation. Auditing Inventory: Substantive Analytical Procedures Explained When it comes to auditing inventory, one of the most valuable tools in an auditor’s arsenal is substantive analytical procedures. These procedures help auditors evaluate the reasonableness of recorded inventory balances by analyzing financial and non-financial data patterns. They offer a cost-effective and efficient way to detect potential misstatements, especially when used alongside tests of details. In this blog post, we’ll explain what substantive analytical procedures are, how they apply to inventory, and provide real-world examples to illustrate their use. What Are Substantive Analytical Procedures? Substantive analytical procedures are audit techniques that involve analyzing relationships between financial and/or non-financial data to identify inconsistencies or unexpected results. These procedures are used to obtain audit evidence, especially during the substantive testing phase of an audit. When applied to inventory, they help auditors assess whether the recorded inventory values are reasonable by comparing them to expected amounts derived from independent calculations or historical data. Why Use Analytical Procedures for Inventory? Inventory is a high-risk area in many audits because it involves complex valuation methods (e.g., FIFO, LIFO, weighted average), risk of obsolescence, potential manipulation, and large volumes of transactions. Analytical procedures can help detect red flags such as: Inventory buildup without corresponding sales Decrease in inventory turnover Gross profit margin inconsistencies Unusual fluctuations in unit costs or quantities Best Practices for Applying Analytical Procedures Establish Expectations: Use budgets, industry data, or historical trends to develop a reliable expectation. Investigate Deviations: Any variance beyond a predefined threshold (e.g., 5% or 10%) should be investigated and corroborated with other audit evidence. Corroborate with Details: Analytical procedures complement but do not replace detailed testing such as inventory counts or valuation testing. Document Thoroughly: Auditors should clearly document the method used, data sources, expectations, and any explanations for deviations. Conclusion Substantive analytical procedures offer auditors an efficient method for identifying potential misstatements in inventory accounts. When applied correctly, they provide valuable insight into inventory trends and red flags that may require further investigation. However, they must be used in conjunction with other substantive tests to form a complete audit opinion. Understanding how to design and interpret these procedures is a must-have skill for every auditor, especially those preparing for the CPA exam or working in inventory-heavy industries. #auditing #analyticalprocedures #substantiveprocedures