(d) There are many inherent risks that may affect the inventory of books and some of these are set out below, together with controls that would mitigate each risk.
Inherent risks
Risk of deterioration.
Some books may not be saleable because of lack of demand.
Books may be defective and therefore not saleable.
Books may be attractive and easily transportable, making attempted theft likely.
Poor counting of inventory at the period end.
Poor cut-off as there may be movements of goods during the inventory count.
Goods on sale or return are held by customers but should be included within inventory until the return period is passed.
Mitigating controls
Books should be stored in a location with air conditioning to keep them in saleable state.
Maintenance of movement records to identify slow-moving items.
Inspection of books returned from customers to identify those that are not in good condition. Identification of defective items at interim or period-end inventory counts.
Books to be kept in a secure location with restriction of entry to authorised personnel.
The use of independent and experienced inventory counters.
The use of teams to cover specific areas of the locations where inventory is held.
The use of pre-numbered inventory count sheets. And other inventory count procedures.
Movement of books out stopped during the count or only allowed by permission of authorised official in
charge of the count.
Book returns received during count held in separate area. Identification of last movements in and out.
Detailed records should be maintained of goods on sale or return and this should be reviewed at the year end to ensure that any goods within the return period have been included in inventory.
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