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Hi Carolyn,
I'm amazed that over 100 peope have read your post, and not one has ventured a reply, as you clearly need some help here. If I start this off, then maybe some other learned guidance may dip in too afterwards.
Your suggested approach makes sense in the absence of anything else.
The audited opening balance has to be the firm starting point.
Things that may affect your calculation to get to closing stock could include :
- a general sales price rise across the stores part way through the period
- any zero rated VAT items (if records are this poorly kept, do the SDB and PDB analyses make sense ?)
- customer returns policy
- evidence of an authorised credit note process.
- inter store transfers
- do issues and receipts match at each end ?
- allowance for time expired items and pilferage
- staff sales process
- are all inventories held within the two stores, or is there a remote storage facility
- do any inventory provisions exist, and is there evidence of GL postings in 2010/11 that will affect your review.
Stating the obvious, you need to be advised what valuation policy exists - Standard Cost, LIFO, FIFO, Average Cost etc and be confident that this is consistent from the previous year.
You should definitely cover your own position in your engagement letter, and have it agreed with a Director.
Directors have a duty of stewardship for business assets, even if they are also the sole shareholders.
The Accountant should be qualifying the accounts if the risk of inventory value mis-statement is material to the financial statements, as this could mean an incorrect corporation tax charge, or owner-directors awarding themselves unrealistic remuneration based upon questionable revenue gain.
Last thought.............are the other assets simply recorded as spreadsheet lists too.....bankings, creditors, fixed assets ?
postscript
Looks like some more help has just been offered - thanks Ruth
Edited at 17 Oct 2011 08:40 PM GMT
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