Audit: inventory count
Attend the year-end stock count: test counts both ways, check goods coming in, and review slow-moving stock.
ACCA exams this helps with: AA Audit and Assurance See the ACCA map
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Most businesses that hold stock count it at the year end, and the auditor goes along to watch. You check that the count is well run, do your own test counts, and note anything that affects the value of the stock, such as late deliveries or items that won’t sell for what they cost.
Example. The count sheet says 260 bags, but you count 236 on the shelf. That is 24 bags that may not exist.
Key words
- Test count
- A count of stock done by the auditor to check that the client’s count is accurate.Example: The auditor counts 236 bags on the shelf, while the count sheet says 260.
- Count sheet
- The client’s form listing each stock item and the quantity counted at the stock count.Example: The count sheet says 260 bags of Ethiopian beans.
- Goods received note (GRN)
- A document created when goods arrive, recording what was delivered and when.Example: GRN-889 records 200 bags of beans delivered at 5:30pm on 31 March.
- NRV
- Net realisable value: what an item of stock is expected to sell for, minus the costs of finishing and selling it. Stock is valued at the lower of cost and NRV.Example: Gift tins sell for £4.50 and cost £0.50 each to sell, so NRV is £4.00. They cost £6.00, so they are valued at £4.00.
- Count memo
- The auditor’s written record of what happened at the client’s stock count: how it was run, the test counts done, and any problems found.Example: “The count was well organised, but the supervisor counted aisle 4 alone.”
Your brief and documents
Same client, Harbour & Hale Coffee Roasters Ltd. It is 31 March 2026, and you are at the client’s warehouse to attend the year-end stock count.
Hi,
You’re at the Harbour & Hale count tomorrow at 2pm. Please:
- Watch how the count is run and note anything that isn’t controlled properly.
- Do test counts both ways: from the count sheets to the floor, and from the floor to the sheets.
- Note the last goods received before the count, so we can check cut-off.
- Look out for damaged or slow-moving stock.
Take photos of the final count sheets before you leave. Thanks, Sam
Document 1: Your test counts
| Direction | Item | Description | Count sheet | Your count | Cost per unit £ |
|---|---|---|---|---|---|
| Sheet → floor | C-101 | Colombian beans 1kg | 420 | 420 | 10.20 |
| Sheet → floor | C-114 | Ethiopian beans 1kg | 260 | 236 | 11.50 |
| Sheet → floor | E-220 | Espresso blend 500g | 900 | 900 | 5.20 |
| Sheet → floor | M-305 | Paper cups, box of 1,000 | 75 | 75 | 24.00 |
| Floor → sheet | G-410 | Grinder spare blades | not listed | 40 | 9.00 |
| Floor → sheet | D-512 | Decaf beans 1kg | 150 | 150 | 10.80 |
Document 2: Your notes from the count
- Counters worked in pairs and wrote on pre-numbered count sheets.
- The warehouse supervisor, who is responsible for the stock, counted aisle 4 alone, and nobody checked her count.
- At 5:30pm a delivery of 200 bags of C-101 (goods received note GRN-889) arrived and was left in the loading bay. It wasn’t counted. The finance team says the supplier’s invoice has been recorded in March’s payables.
- There are 1,200 seasonal gift tins on a back shelf. They cost £6.00 each. The sales team says they now sell for £4.50, with £0.50 of selling costs per tin.
Watch it explained
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Videos from YouTube tutors
These videos are made by independent tutors on YouTube, not by Trial Balance. Some use US terms or older exam names (for example F7 for FR), but the principles are the same.
How a senior would approach it
- Two directions, two assertions. Sheet to floor tests existence: is the stock on the sheets really there? Floor to sheet tests completeness: is everything on the floor on the sheets?
- Value every difference. A difference in units means little to a reviewer. Quantity × cost does.
- Cut-off at a count means the stock and the paperwork must match. If an invoice is recorded as a liability, the goods must be in the count, and the other way round.
- Controls matter as well as numbers. If the count isn’t well controlled, the auditor can’t rely on it and has to do more work. Watch for people counting their own stock without checks, sheets that aren’t numbered, and goods moving during the count.
- Slow-moving stock: compare cost with net realisable value (selling price minus selling costs) and write down to whichever is lower (IAS 2).
Your tasks
Work through the tasks in order, using the documents in your brief. Each task is checked when you press Check answer.