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Chapter 8 3 4

Advantages of perpetual counts

 Reduces time constraints for the auditor, and enables them to attend counts
relating to lines at greater risk of material misstatement.

 Slow-moving and damaged inventory is identified and adjusted for in the client's
records on a continuous basis meaning the year-end valuation should therefore
be more accurate.

Disadvantages of perpetual counts

 The auditor will need to obtain sufficient appropriate evidence that the system
operates effectively at all times, not just at the time of the count.

 Additional procedures will be necessary to ensure that the amount included for
inventory in the financial statements is appropriate, particularly with regard to
cut-off and year-end allowances.

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