31 March year ends are fast approaching and you may be expecting one of the audit team to visit your premises to view your stocktake or check the year end perpetual stock position.
However, following the government’s announcement restricting travel and work only to businesses classified as essential you may not be in a position to undertake your usual year end stock assessment.
Also, in light of the restrictions audit staff will not be able to attend clients’ premises.
This means we need to consider:
- How you can determine your year-end stock; and
- How we, as auditors, can obtain sufficient appropriate audit evidence as regards the existence and completeness of stock at the balance sheet date.
The guidance below will apply equally to 30 April year ends and any subsequent periods until the current crisis has abated and we can revert to the more traditional approach.
What if I have to close my business or it is already closed?
You should consider:
- Running a record of perpetual inventory at the date of closure or at the date of reopening with spot checks carried out to confirm accuracy; or
- Undertaking a stocktake as soon as practicable after reopening, retaining records of:
- any deliveries you receive during the closure period; and
- any deliveries or despatches that occur between opening and the count.
What if my business is continuing to operate?
You should consider:
- Where stock is expected to be material, or where there have been material errors in previous years, the year-end stock procedures should continue as far as possible as usual; and
- How to approach the process in order to minimise risk to your staff.
What will be the approach of the audit team?
We will take the following steps:
- Talk to you to understand your approach and the stock taking procedures you are planning;
- If the stocktake takes place after the government restrictions have been lifted we will most likely attend the stocktake as usual;
- Otherwise as we are not physically able to attend the stocktake we will consider the following alternative procedures:
- Using technology to provide evidence of the year end counting process and perform sample checks – e.g. time-stamped photos, facetime or other filming options which can be retained by us as evidence (this is likely to require careful planning and a test run before the stocktake date);
- Reviewing results of spot checks on perpetual inventory records and arranging to attend to test perpetual records at a later date;
- Counting at a later date and rolling back results to the year-end; and
- Making use of any third party stock counters/ storage facilities you may use.
What happens if there is no satisfactory alternative to attending the stocktake?
In this event:
- We will contact you to discuss the implications; and
- Ultimately, if we are unable to reach a satisfactory alternative to attending the stocktake under the current circumstances we may have to consider qualifying our audit report in relation to the existence of stock. This would refer to the limitation in the scope of our work arising from Covid-19 .
Are there any other options?
Yes – you could extend your accounting date to beyond the current crisis – but this has other potential consequences.
How we can help
- Assisting you with how to approach your stocktake; and
- Working with you on how to obtain the audit evidence we need.