Audit procedures: valuation
In this lesson, you'll learn how auditors verify that inventory is valued correctly under international accounting standards. Specifically, you'll discover the audit procedures for testing both cost and net realisable value—the two key components of the lower of cost and NRV rule.
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In this lesson
- 0:00 Audit procedures for inventory valuation
- 0:07 Lower of cost and net realisable value rule
- 0:36 Verifying inventory cost and production overheads
- 1:51 Assessing net realisable value evidence
- 3:01 Cut-off audit procedures practice question
About this lesson
You'll see how to recalculate cost figures, agree them to supplier invoices, check that production overheads are reasonable, and assess NRV by examining sales prices and post-year-end events. The lesson includes a worked example on cut-off testing, showing you how to distinguish between the most effective audit procedures and why timing matters when matching sales to goods despatch notes. This content is essential for AA (Audit and Assurance) students preparing for exam questions on inventory audit procedures. Understanding these techniques will help you apply the right tests in practice and answer case study questions with confidence.
Duration: 5m
Transcript
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