AUD Inventory · Updated November 2026
Inventory Audit: Are You Testing the Count or the Cost?
Inventory quantity and inventory valuation are separate audit problems.
Quantity testing
The auditor observes management's physical count, performs test counts, and evaluates count procedures to support recorded quantities.
Pricing testing
The auditor tests unit costs using invoices, cost records, standard-cost support, and applicable inventory accounting rules.
Valuation
Testing can also address whether inventory requires write-downs for obsolescence or lower-of-cost-and-NRV considerations.
Cutoff
Receiving and shipping activity around year-end helps determine whether inventory was recorded in the correct period.
The takeaway
Physical observation and test counts support quantity. Pricing tests support valuation. A complete inventory audit needs both.
Related Summit guides
FAQ
Does observing the count prove inventory is properly valued?
No.
Can invoice testing support inventory pricing?
Yes.
Does cutoff matter to inventory?
Yes.