JofA article
By Bob Dohrer, CPA, CGMA, as told to Ken Tysiac
Editor’s note: The coronavirus pandemic has made inventory testing a huge challenge for auditors, particularly for client entities with a March 31 fiscal year end.
Audit firms are requiring staff to work from home and banning staff travel. Clients are telling auditors not to come on site visits. And in many places, most businesses are legally prohibited from opening their doors.
But AICPA Chief Auditor Bob Dohrer, CPA, CGMA, said it is possible for auditors to observe inventory without being on-site, under generally accepted auditing standards issued by the AICPA Auditing Standards Board. Here are his comments, which come with the caveat that they do not necessarily apply to audits of public companies under PCAOB standards.
There are situations coming very quickly here, where by law we may not be able to go out to a client location and physically observe inventory like we’ve done in the past for March 31 year ends and probably extending out to June 30 year ends. We do have standards directly related to physical observation of inventory that we need to comply with. Those are in AU-C Section 501, Audit Evidence — Specific Considerations for Selected Items, Paragraphs .11–.14, and then a series of application paragraphs that go along with it.