As mentioned in post #39, stocks should be valued at lower of its cost or net realizable value. This has posted a imperative audit work step: to ascertain that the respective items is value at cost or net realizable value (Note: each Respective items have to be valued at cost or net realizable value).
How do we ensure that the stocks are valued properly?
1. Randomly selected a certain number from inventory listing.
2. To find out the most recent sales/ subsequent sales after year end. (general guide: 3 months)
3. From the invoices, noted down selling price.
4. Compare the selling price to the actual cost of the sample.
5. Cost > Selling Price, valued at selling price
Selling Price > Cost, valued at cost.