ABC Limited is a large drug manufacturing unit, having units at Hyderabad and Ahmedabad. The management has nominated an expert team from different…

Hyderabad Unit: Physical Inventory Counting Conducted other than at the Date of the Financial Statements: As per SA 501, “Audit Evidence-Specific Considerations for Selected Items”, if physical inventory counting is conducted at a date other than the date of the financial statements, the auditor shall, in addition to the required procedures, perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial statements are properly recorded/ whether the perpetual inventory records are properly adjusted. Relevant matters for consideration when designing audit procedures to obtain evidence about whether change in inventory amounts between the count date, or dates, and the final inventory records are properly recorded include: i. Reliability of the entity's perpetual inventory records.ii. Reasons for significant differences between the information obtained during the physical count and the perpetual inventory records. Ahmedabad Unit: If attendance at physical inventory counting is impracticable: As per SA 501, Audit Evidence-Specific Considerations for Selected Items”, in some cases, if the auditor is unable to attend physical inventory counting due to unforeseen circumstances, the auditor shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions. If attendance at physical inventory counting may be impracticable due to factors such as the nature and location of the inventory, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory, for example inspection of documentation of the subsequent sale of specific inventory items acquired or purchased prior to the physical inventory counting, may provide sufficient appropriate audit evidence about the existence and condition of inventory.