How Does An Auditor Prepare For Stock-In-Trade Valuation?
Evaluating the stock-in-trade actually implies finding out the real value of all the closing stocks for noting in the books and revealing in the account respectively.
Check this out for knowing the Auditor’s duty regarding the Stock-in-trade valuation.
- He must ensure if the method of valuation applied is standard and has no variation when compared to the previous year’s style.
- If in case, a change is being seen, the Auditor must disclose this matter in his report and determine if they follow the recognized principle procedures in the further valuations.
- While the Auditor follows the testing procedures, he must strictly stick to the rules and preferred guidelines recommended by ICAI.
- Further, he can proceed to verify the processing accuracy of the stocks by indeed carrying out a few computations involved in valuation.
- Moreover, the Auditor must concentrate on the matter like there exists no case of under or over examining of the products or any sort of misconduct by the management which can, in fact, affect the true and fair view of the accounts.
- The Company Act specifies that the prices of stores and spare part section, loose tool items and every stock in trade assets along with all the work-in-progress consideration are all disclosed individually in their respective record sheets.
It is also mandatory for the company Auditor to report to the higher officials whether
- He is contented with the results of examination of the company stocks and also if the valuation represented was fair and appropriate that complies with the standardly accepted accounting principles.
- He has to report if any kind of damaged or unserviceable items were found during physical verification together with any stores of raw materials or finished products if seen. He must take immediate action to see that clear provisions are taken for the loss made.
- In the case of analyzing the inventories, the Auditor must observe that the accounting policies are truly disclosed in the closing accounts and the test checks were carried out to know the truth regarding the physical count of these items.
The CARO recommends the stock valuations to be reasonable and is carried out on the accounting principles laid y the ICAI. This principle relies upon
- The agreement on Auditing practices
- And also, the accounting standards based on the assessment of the inventory items.
It is obvious that the Auditor must take care of these provisions while valuing the various stock items in trade and also while accounting for the trading companies.