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Coronavirus: considerations for the audit of inventory

31 March 2020: the spread of coronavirus and restrictions on movement are affecting year-end inventory counts, which has implications for auditors. ICAEW’s Audit and Assurance Faculty has issued a guide setting out common questions and answers to help.

Following on from the recent article covering the ISA (UK) requirements, the Audit and Assurance Faculty has drafted a new guide for auditors. It sets out common issues faced by auditors in the UK and elsewhere, and considers alternative audit procedures for cases where physical attendance is impractical due to COVID-19. 
 
In many jurisdictions where coronavirus is widespread, management may be considering or required to delay inventory counts and may be shutting warehouses to protect the health of employees. In countries where the impact of the virus is more limited, management may consider moving inventory counts up in timetables. The guide sets out practical considerations for both scenarios. 
 
Some auditors may be considering conducting remote reviews. Caution should be taken with this, as there are likely to be limitations to these approaches. The guide highlights several areas to reflect on. Solely using remote reviews is unlikely to provide sufficient, appropriate audit evidence and should be part of a package of alternative procedures. The new guide discusses other common alternative procedures that may be helpful to auditors. 
 
Ultimately, auditors will need to stand back and assess whether on the whole, the alternative audit procedures have provided them with sufficient, appropriate audit evidence to fulfil auditing standard requirements. If they have not, then auditors will need to modify their audit opinion. 
 
To read the full guide for auditors from ICAEW’s Audit and Assurance Faculty click here.