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CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions

Internal auditors of Ganga Pharma Ltd attend a physical stock count at year end. Several count sheets show round figures, and a few high-value items have identical quantities in the count and in the book records, while low-value items show large differences. Which is the most reasonable inference and response?

The pattern suggests possible count manipulation, as figures may have been copied from book records or estimated. The auditor should perform independent test counts, especially of high-value items, and examine count sheet controls. Accepting the matches as proof of accuracy would ignore the red flags.

  1. APossible count manipulation or bias; perform independent test counts of high-value items and examine sheet controlsCorrect
  2. BConclude the count is accurate because high-value items match
  3. CAsk the storekeeper to adjust the book records to the low-value counts
  4. DCancel the audit since differences are normal

Explanation

Exact agreement on high-value items with large differences elsewhere, plus round figures, suggests counts may be copied from records or estimated. The auditor should perform independent test counts, check sheet numbering and supervision. Accepting matches as proof or letting the storekeeper adjust records would defeat independence.

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