[MeghanCPA]

I am reviewing ch.4 material – Inventory Count. Does anyone know if the auditor propose adjusting entry to the client if the auditor inventory count does not agree with the client system. For example, if the client system says the inventory number is 10 but the auditor counts 8, what the journal entry will be.Dr COGS and Cr Inv

Dr COGS 2

Cr Inventory 2

[kb24]

Are you asking if the auditor makes the proposed adjusting entry to the client or are you asking what the journal entry will be?

FAR 4/1/11 - 89
AUD 4/15/11 - 85
REG 4/29/11 - 80
BEC 5/13/11 - 85

[MeghanCPA]

The auditor makes the proposed Adjusting Entry to the client!

[SoonToBeCPAChick]

Just from your description of the situation, it is difficult to tell what the entry would be. If a sale occurred and wasn't recorded in the system, then yes it would be:

DR COGS

CR Inventory

To corroborate this, you would have to view shipping documents and determine when it was shipped for cutoff purposes.

However, if somone just miscounted upon receiving the inventory and entered an additional 2 items into the inventory listing, then no sale has occurred and COGS would not be affected. This type of situtation arises when the Company you are auditing is a distributor and receives inventory then sells it. The entry would most likely be

DR AP

CR Inventory

Your answer is probably the more likely scenario of the two, so if that is all the information given that is probably your answer.

FAR 10/1/2010 =====> 90
BEC 10/28/2010 ====> 81
REG 2/2/2011 ======> 82
AUD 5/28/2011 =====> 92 ===========>DONE!!!!

[Author]

Replies