Suppose you're auditing a retail client's year-end inventory count. What steps would you take to verify the reported inventory figures?

Situation

In my college auditing class, we simulated an inventory observation for a hypothetical retail company. The data included discrepancies between system records and physical count sheets.

Task

I had to design a verification plan that would satisfy the audit objective of existence and accuracy of inventory.

Action

First, I reviewed the client's inventory counting instructions. On the hypothetical count day, I planned to observe the counting teams, perform test counts on a random sample of high-value items, and trace them back to the final inventory listing. I also planned to inquire about obsolete or damaged goods and check for proper cutoff of shipments.

Result

My plan identified several misstatements: uncounted items in the backroom and wrong unit prices. In our class simulation, this reduced the risk of material misstatement and earned me a high grade for practical application.