Part (b) for 3 marks required procedures the auditor should perform in order to place reliance on the continuous counts for inventory. Candidates’ performance was disappointing.

Many candidates provided lengthy answers on procedures to be carried out when attending a year-end inventory count or procedures to verify valuation or completeness/existence of inventory, suggesting that a significant proportion of candidates do not understand continuous inventory counts, the risks associated with this and therefore the areas the auditor needs to focus on.

A small proportion of candidates correctly identified that it was important to confirm if all inventory items were counted at least once a year and also to assess the level of adjustments made during these counts.

Inventory is a key element of the financial statements and candidates need to be able to provide relevant procedures for both full year-end counts as well as continuous counting.