Publication of Guidance for Auditors Key Considerations for Inventory Counts under COVID-19 Situation

The audit of financial statements is required to be carried out in accordance with International Standards on Auditing (ISAs).

The requirements of the ISAs have not changed as a result of the COVID-19 pandemic.

Therefore, irrespective of the lockdown measures, restrictive travelling, closure or limited physical access to offices, businesses and public spaces, auditors are required to obtain sufficient appropriate audit evidence to form an audit opinion on the financial statements. The present circumstances also transpire that there could be various implications on the audit process and timelines, as auditors could face challenges in obtaining sufficient appropriate audit evidence.

Challenges for auditors’ attendance at inventory counts

ISA 501 Audit Evidence – Specific Considerations for Selected Items, requires the auditor to obtain audit evidence for inventory by attending the inventory count.

However, in current COVID-19 situation, one of the most significant issue for auditors would be attendance at the inventory counts.  There could be various possible reasons and challenges in management conducting, and the auditor attending, the inventory count. The underlying reasons for these challenges could be government-imposed restrictions, management-imposed restrictions, auditor’s inability to attend the stock-take due to travel restrictions or safety concerns, or in the case of inventory held at third-party warehouses, the third-party imposed-restrictions. The implications of not being able to obtain sufficient and appropriate audit evidence on inventory can have an impact on the audit opinion.

Key considerations for inventory counts under COVID-19 situation

The Institute is cognizant of the difficulties faced by auditors in carrying out their audits in current COVID-19 impacted environment.

With the object to facilitate auditors in understanding and responding to the challenges faced in attending the inventory counts of entities (in present COVID-19 impacted environment) the Institute’s Technical Services team has developed the publication “Key Considerations for Inventory Counts under COVID-19 Situation”.  The Guidance highlights principal considerations for the auditors to address different implications of the COVID-19 related circumstances and conditions on their attendance at the inventory counts.

The publication is supported by a separate detailed document (Questions and Answers) containing various key questions and scenarios along-with responses on these issues, in accordance with the ISAs. 

The publications can be accessed at:

http://www.icap.net.pk/wp-content/uploads/2020/06/Key-Considerations-for-Inventory-Counts-under-COVID-19-Situation.pdf

http://www.icap.net.pk/wp-content/uploads/2020/06/Questions-and-Answers-on-Key-Considersations.pdf

We hope you find the publications helpful.

Circular 7 – Key Considerations for Inventory Counts under COVID-19 Situations