Balance-related audit objectives

Balance-related objectives concern what the company owns or owes at a particular date. Suppose Jengka Furniture reports inventory of RM100,000 at 31 December. The auditor needs evidence about the goods, the company’s rights to them and the amount reported. standards.xrb.govt.nz

Objective	Question the auditor asks	Example of an audit procedure
Existence	Are the goods on the inventory list physically present?	Select tables from the inventory list and locate them in the warehouse.
Completeness	Has the company included all inventory that should be recorded?	Select tables in the warehouse and trace them to the inventory list. Follow up on any missing item.
Rights and obligations	Does the company have rights to the recorded goods? For a liability, does the company owe the amount?	Inspect supplier agreements to establish whether timber held in the warehouse belongs to the company or is held on consignment for a supplier.
Accuracy, valuation and allocation	Are the quantities, unit costs and carrying amounts appropriate?	Recalculate quantity × unit cost. For damaged tables, compare cost with the estimated selling price less the costs needed to complete and sell them.
Classification	Has the company placed the goods in the correct category?	Check whether unfinished tables are classified as work in progress and completed tables as finished goods.
Presentation	Does the company present and disclose inventory appropriately?	If inventory is pledged as security for a bank loan, inspect the loan agreement and check the relevant disclosure.

Two textbook terms help students describe specific tests. Detail tie-in means checking that the detailed inventory listing adds up and agrees with the general ledger. Realisable value focuses on recoverability. For example, if a finished table costs RM500 and its net realisable value has fallen to RM350, the required write-down is RM150. A listing can add up correctly even when the goods are overvalued.