Because of the COVID pandemic, auditors with audit clients that have material inventories are trying to decide whether and how they can audit those inventories and particularly, whether they can remotely observe inventory counts in a manner that will provide them persuasive evidence. AU-C 501, Audit Evidence – Specific Considerations for Selected Items, specifically paragraphs 11-14, indicate that the auditor should attend physical inventory counting unless impractical. Clearly the COVID pandemic and related travel and social gathering restrictions can make attending a physical inventory count impractical.
This report walks through the three-step process for determining if a client has appropriate controls in place to perform a virtual inventory count as well as the procedures for performing the count itself. We also include a checklist of considerations and procedures to be evaluated throughout the planning process.