a. FIVE weaknesses in the client‟s control system for the inventory count.

i. All the staff involved in the physical count were drawn from the stores department;

ii. Prenumbered count sheets issued to the staff during the count showed the inventory ledger balances for cross-checking against the physical counts;

iii. Physical counts were recorded on the count sheets in pencil for easy amendments;

iv. Inventories not previously recorded on the count sheets were recorded separately on different count sheets numbered only by the counting staff;

v. The physical inventories were counted without due regard to damaged and obsolete inventories;

vi. All inventories, including those belonging to third parties, were counted and recorded along with the entity‟s inventories;

vii. At the end of the inventory count exercise, the sequence of the sheets were not checked nor the recapitulation done; and

viii. The count sheets were not duly signed by the responsible officers.

b. The reasons to prove that each of the identified items in (a) above is a weakness.

i. The staff may be motivated to conceal errors or deficiencies in their own work;

ii. The staff may be tempted to adjust their physical count to match the ledger balances;

iii. The records may be amended after the count has been performed;

iv. The count sheets may be lost or fraudulently completed;

v. Damaged and obsolete inventories may be included in the final inventory valuation at full cost price;

vi. Inventories may be overstated if third party inventories are included;

vii. Count sheets may be lost or added; and

viii. There is no proof of who performed the count or reviewed the count sheets.

c.  How each of the FIVE identified weaknesses could be addressed.

i. Counting teams should include non-stores staff;

ii. The count sheets should be blank or the ledger balances should be added after the count;

iii. Counts should be recorded in ink;

iv. All count sheets should be prenumbered by a senior official;

v. Damaged and obsolete inventories should be identified and flagged during the count;

vi. Third party inventories should be identified and recorded separately;

vii. A senior official should check the sequence of the sheets and perform a recapitulation; and

viii. Count sheets should be signed by the counter and the reviewer.