7.

Stock
Purchases
7.1 Material stock purchases are put out to tender before supplier selection in accordance
with Group Procurement Guidelines.

Testing
1. Record the vale of stock in the GL (is this material?).
2. Enquire whether any material stock purchases have been made in the
previous 12 months. If yes investigate whether a tender process was used in
line with Group Procurement Guidelines.

Results

Recording and Accounting

7.2 On receipt, stocks are promptly recorded on Goods Received Notes and in a stock
book.

7.3 Updates to the register are authorised and checked.

7.4 Stock records are regularly reconciled to the accounting records, including the
General Ledger.

7.5 Stocks are accounted for in accordance with GAAP and Group policy.

Testing
Record the stock management process on file. Include:

1. the receipting of stock;

2. updating the stock records;
3. stock take procedures and frequency (including WIP and stock held at third
party sites);
4. the documentation and reporting of stock take results;
5. the treatment of missing, obsolete and slow moving stock
6. verification of actual stock against accounting records; and
7. the adjustment of accounting records for discrepancies.

Evaluate whether these are sufficient to comply with Minimum Standards.

Evaluate whether the recognition of stock in the accounting records is compliant with
GAAP and Group policy.

Choose a sample of 5 items from the stock records and perform a physical count to
verify the actual number held.

Reverse the test by counting 5 items in the stock room and checking these to stock
records.

Record the results.

Results

Physical Verification and Reconciliation

7.6 Stocks are physically verified on a regular basis and agreed to stock records and
General Ledger. The results are documented.

7.7 Stocks at third party sites are verified.

7.8 WIP and Consumables are regularly verified and reconciled.

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 Testing
Covered above in testing for 7.2 – 7.5.
Valuation
7.9 Revisions to valuations (eg due to obsolescence, revaluations and write offs) are
properly authorised.

Testing
Covered above in testing for 7.2 – 7.5.
Security and Storage
7.10 Stocks are stored safely and tidily on appropriate racking etc

7.11 Stocks are safeguarded from waste, fraud, loss, unauthorised use and
misappropriation by human action or natural occurrences.

Testing
Visit the stock room to ascertain the appropriateness of stock physical security and
storage. Record the adequacy of these.

Results

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