Actions auditors can take to support December year-end stocktakes.
With tougher restrictions under the tier systems in place for most of the country, practitioners and their clients may struggle to arrange physical stocktakes. This problem will be felt acutely for companies with December year-ends, which is one of the more common financial year-ends, other than March.
At the heart of the matter is the requirement for auditors to obtain sufficient, appropriate audit evidence in order to be able to give an audit opinion that is not subject to a disclaimer or qualification due to a limitation in scope.
Some actions that the auditor can take to assist with this are:
Ensuring clients have good contiguous records of the stocks during the relevant period and at the year-end date, together with movements post year-end. The auditor will need to obtain and retain adequate evidence under the usual audit processes so that reliance can be placed on that process and evidence, taking into account any cumulative knowledge of the client’s systems.
Arrange a virtual stocktake via video conference using either business Skype or WhatsApp video chat – the auditor will need to ensure they have the full stock records sent by the clients with them during the virtual stocktake and then instruct the client’s own staff to evidence the physical counts via video evidence. This can be live or recorded, although with a pre-recorded video, auditors should ensure that there is a date/time stamp evidence of when this was recorded. They must ensure that adequate digital evidence is gathered and retained as you would under normal situations.
Consider extending the financial year-end of the company by changing the accounting reference date so that a physical stocktake may be able to be arranged in a few months’ time when the situation has potentially improved and staff and/or travel restrictions have eased.
If the above suggestions are not viable or possible for any reason, then the only option may be to qualify the audit report in respect of the stock valuation. The reasons for qualification should include the impact of Covid-19.