Sometimes a business has a number of branches or subsidiaries working for the parent company. Though these branches or subsidiaries could act as an independent company, some part of it is still answerable to the parent company. I order to fully understand the business, the auditor must audit all its subsidiaries and this is where multi-location audit comes in.
Having different branches or subsidiaries can give birth to a business risk as the auditor may miscalculate the resources at a location. This means that the audit will not be conducted in a proper manner as the data set of the auditor is wrong. This will greatly increase the risk for the parent company. To solve this issue, a Multi-location audit can be done by the parent company.
There are two major issues brought up by the Multi-Location audit. Namely:
- To start with the auditor must decide upon the degree of work needed as far as the number of locations to be visited, the inclusion of the audit work required according to the size of the company, etc. must be determined beforehand.
- The auditor should make the assessment of the audit results at every location visited and their impacts on the audit of the parent company.
This article will help you to understand the concept of multi-location Audit and will also help in identifying the risks to multi-location audit.
The Concept of Multi-Location Audit
Whenever an audit of the company is conducted, it is the duty of the auditor to decide what locations of the business are to be audited, how many resources are to be involved, what are the different process which will be used, etc. this will help the auditor to understand what resources are available to the business and will allow the auditor to have a proper count of resources of the business.
This is where the auditor uses the concept of multi-location audit to conduct an audit of the different subsidiaries or branches which might have the resources of the parent company. As all the resources will come under the purview of the auditor, he will be in a better position to provide financial information about the company and its financial standing. This will reduce the chances of error in the audit report of the parent company.
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Techniques That Auditors Use Now to Assess Inventory as Part of a Multi-Location Audit
There have been a number of cases of such errors due to which the parent company has suffered as the auditor is unable to provide a complete financial picture of the company. Below are some of the different methods utilized by an auditor to properly utilize multi-location audit:
1. Performing Manual Check of the Inventory
Before wandering into the field to see inventory face to face, your auditors will demand a duplicate of the company’s inventory manual. This encourages them to comprehend the strategies and systems you use to oversee inventory. Auditors will analyse the company’s inventory records against the manual for disparities and exemptions through the audit.
2. Leading in-depth analytical procedures at every location
To protect against enlarged inventory adjustments, your auditors will survey the company’s accounting records. This encourages them to comprehend the cycle to distribute and dole out inventory units and expenses to individual locations.
3. Checking Inventory
Contingent upon the size of your company’s stock, the auditor may lead autonomous inventory checks or watch physical inventory counts led in-house or by outsiders. As a significant aspect of the inventory inspection measure, your audit group may arbitrarily choose an example of things and confirm that those things are remembered for the inventory check.
On the other hand, the auditor may choose a thing that shows up in the inventory tally and afterwards endeavour to find that thing in the company’s stores. At the finish of the physical tally, the auditor may also perform a factual examination to test the physical inventory check precision.
4. Analysing general ledger entries
Journal entries can provide a lot of data to the auditors about the movement of inventories. This is why it is the duty of an auditor to go through and understand the various entries made in the business journal.
On the off chance that abnormalities are identified in general ledger transactions, your auditor has the right to request documentation and itemized clarifications from the board with respect to the motivation behind the purpose of the entry.
Conclusion
Inventory controls have assumed a crucial part in incalculable frauds. In this way, auditors have figured out how to give close consideration to the inventory account. The extension and profundity of stock auditing methodology rely upon numerous variables, including the number of locations you operate.
If your company has various branches in the United Arab Emirates and you are looking to get your business audited via reputed and professional auditors, then JAXA Chartered Accountants can help you in this matter.
JAXA auditors have loads of experience and knowledge to consult you at every individual level. The experts at JAXA will understand the requirements of the company and will provide a relevant solution to the business. Feel free to Contact us for more data about what’s in store as auditors survey your stock adjusts in the coming audit season.
