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Inventory Test Count Variance CalculatorNet Variance and Projection

What do the numbers come to once the work is shown?

Net and gross variance from test counts, the item error rate, and the net variance projected to total inventory by ratio.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Projected net variance in inventory
-$61,724
Test count variance scaled to total inventory
Net variance (count less book)
-$5,200
Net variance as % of book tested
-0.85%
Drawn to one scale
Net variance (count less book)-$5,200
Projected net variance in inventory-$61,724
All results
MeasureResult
Net variance (count less book)-$5,200
Net variance as % of book tested-0.85%
Gross variance as % of book tested1.53%
Item error rate7.50%
Projected net variance in inventory
Ratio projection; key items counted 100% belong outside this projection
-$61,724
How this was worked out
Work shownrecomputed as you type
Net variance = value at count - book value of items counted
Item error rate = items with a difference / items counted
Projected variance = net variance / book value counted x total inventory

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Net variance = value at count - book value of items counted
  • Item error rate = items with a difference / items counted
  • Projected variance = net variance / book value counted x total inventory

How it works

AU-C 501 paragraph .12 requires the auditor, when inventory is material, to attend the physical count and perform test counts, and to check that the final inventory records reflect the count results. Test count differences are misstatements in existence or accuracy.

The projection treats the test counts as a sample. If the counts were picked by a sampling method, AU-C 530 paragraph .13 requires the result to be projected. A small net variance hiding a large gross variance means offsetting errors, which say more about count controls than the net figure does.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Should I count from floor to sheet and sheet to floor?

Yes. Floor to sheet tests completeness of the records; sheet to floor tests existence.

Are differences the client corrected on the spot misstatements?

If corrected in the final records before close, they are not misstatements in the balance, but they are evidence about count controls.

Is the projection valid for haphazard picks?

Treat it as an indication. A projection from a non-random selection does not support a statistical conclusion.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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