If inventory is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by:

1. Attendance at physical inventory counting, unless impracticable, to: (Ref: Para. A1-A3)
   1. Evaluate management’s instructions and procedures for recording and controlling the results of the entity’s physical inventory counting; (Ref: Para. A4)
   2. Observe the performance of management’s count procedures; (Ref: Para. A5)
   3. Inspect the inventory; and (Ref: Para. A6)
   4. Perform test counts; and (Ref: Para. A7-A8)
2. Performing audit procedures over the entity’s final inventory records to determine whether they accurately reflect actual inventory count results.

If physical inventory counting is conducted at a date other than the date of the financial report, the auditor shall, in addition to the procedures required by paragraph 4 of this Auditing Standard, perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial report are properly recorded. (Ref: Para. A9-A11)

If the auditor is unable to attend physical inventory counting due to unforeseen circumstances, the auditor shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions.

If attendance at physical inventory counting is impracticable, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory.  If it is not possible to do so, the auditor shall modify the opinion in the auditor’s report in accordance with ASA 705.^[3] (Ref: Para. A12-A14)

If inventory under the custody and control of a third party is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by performing one or both of the following:

1. Request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity. (Ref: Para. A15)
2. Perform inspection or other audit procedures appropriate in the circumstances. (Ref: Para. A16)

[Deleted by the AUASB.  Refer ASA 502  Audit Evidence—Specific Considerations for Litigation and Claims]

The auditor shall obtain sufficient appropriate audit evidence regarding the presentation and disclosure of segment information in accordance with the applicable financial reporting framework by:

(Ref: Para. A26)

1. Obtaining an understanding of the methods used by management in determining segment information, and: (Ref: Para. A27)
   1. Evaluating whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework; and
   2. Where appropriate, testing the application of such methods; and
   3. Performing analytical procedures or other audit procedures appropriate in the circumstances.