ANDROMEDA CO

Before inventory count:

1. Contact Andromeda Co to obtain a copy of the inventory count instructions to understand how
the count will be conducted and assess the effectiveness of the count process.
2. Obtain a list of all 12 locations where inventory is stored and select which locations will be
attended by the audit firm if not all locations can be visited. Priority should be given to locations
with high value of inventory or location with poor controls.
3. Review working papers obtained from the previous auditor to identify any issue that should be
taken in to account this year.
4. Contact Andromeda Co to obtain details of date, time and locations of all 12 warehouse’s
inventory counts.

During inventory count:

1. Observe the count of Andromeda Co to ensure that the inventory count instructions are being
followed.
2. Enquire the counting staff which department they work in to ensure they are not warehouse
staff.
3. Select a sample of items from inventory count sheet and physically inspect them in warehouse.
4. Inspect the inventory being counted for evidence of damage or obsolescence that may affect
the net realizable value.
5. Re-perform the sequence check on the count sheets to ensure none are missing.
6. Record details of the last deliveries prior to 31 Dec to ensure that no further amendments have
been made.

Research and development:

1. Obtain a breakdown of capitalized cost, cast for mathematical accuracy and agree to the
amount included in the financial statements.
2. For a sample of costs included in the breakdown, agree the amounts to invoices and timesheets.
3. Inspect board minutes for any discussion relating to the intended sale or use of the asset.
4. Discuss details of the five projects with the project manager or management to evaluate
compliance with IAS 38 criteria.
5. Inspect budgets to confirm financial feasibility.
6. Inspect the forecasts of next few years for these five projects to ascertain the period over which
economic benefits are expected to be generated and compare with amortization policy, to
assess reasonableness of ammortisation period.
7. Recalculate the ammortisation charge to verify arithmetical accuracy
8. Review the financial statement disclosure in the draft financial statements to ensure compliance
with IAS 38 criteria.