These procedures are performed in order to audit inventory data integrity and to confirm that all inventory transactions entered during the day have been correctly posted to the Inventory, Pending and WIP subledgers and to the General Ledger. To audit Inventory, WIP, and Pending activity, you must perform two major steps. These are.
• Proving that the beginning subledger balances for the Inventory, WIP, and Pending subledgers (Inventory, Pending and WIP quantities multiplied by the unit cost of each item), plus the net Inventory, WIP, and Pending activity for the current day equals the ending Inventory, WIP, and Pending subledger balances for the day. This process is referred to as balancing the subledgers.
• Proving that the ending subledger balances equal the corresponding WIP, Inventory, and Pending control account balances in the general ledger. This process is referred to as balancing the control accounts.
The procedures listed in this section should be completed on a daily basis to reconcile the changes made by the system to the inventory subledgers and to ensure that inventory activity records exist for all of the transactions which affect the subledgers. This section assumes that you are familiar with the various inventory subledgers maintained by the system (Inventory, WIP, Pending), and that you have reviewed and understand the concepts presented in the overview section of this document. If you have not reviewed this information or if you are not comfortable with the concepts discussed in the application overview, then it is strongly suggested that you review this information before proceeding with the listed procedures.