{"id":"F2009L04085","name":"ASA 501 - Audit Evidence - Specific Considerations for Inventory and Segment Information - October 2009","slug":"asa-501-audit-evidence-specific-considerations-for-inventory-and-segment-information-october-2009","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"in_force","isInForce":true,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":81650,"registerId":"commonwealth-F2009L04085-current","compilationNumber":null,"startDate":"2026-04-02","status":"InForce","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Obtaining a Copy of this Auditing Standa","sectionType":"section","heading":"Obtaining a Copy of this Auditing Standard","content":"##### Obtaining a Copy of this Auditing Standard\n\nThe most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au","sortOrder":0},{"sectionNumber":"Contact Details","sectionType":"section","heading":"Contact Details","content":"##### Contact Details\n\n| Auditing and Assurance Standards BoardPhone: (03) 8080 7400E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |\n| --------------------------------------------------------------------------------------------------------------------------------------------------------------------- |","sortOrder":1},{"sectionNumber":"COPYRIGHT","sectionType":"section","heading":"COPYRIGHT","content":"##### COPYRIGHT\n\n© 2023 Commonwealth of Australia. The text, graphics and layout of this Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non‑commercial use subject to the inclusion of an acknowledgment of the source as being the Australian Auditing and Assurance Standards Board (AUASB).\n\nRequests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to [enquiries@auasb.gov.au](mailto:enquiries@auasb.gov.au). Otherwise, no part of this Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.\n\nThis Auditing Standard reproduces substantial parts of the corresponding International Standard on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC), in the manner described in the statement on Conformity with International Standards on Auditing. The AUASB acknowledges that IFAC is the owner of copyright in the International Standard on Auditing incorporated in this Auditing Standard throughout the world.\n\nAll existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only.\n\nFurther information and requests for authorisation to reproduce this Auditing Standard for commercial purposes outside Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to [enquiries@auasb.gov.au](mailto:enquiries@auasb.gov.au). Any decision to approve a request may also require the agreement of IFAC.\n\nISSN 1833-4393","sortOrder":2},{"sectionNumber":"CONTENTS","sectionType":"part","heading":"CONTENTS","content":"# CONTENTS\n\nCOMPILATION DETAILS\n\nAUTHORITY STATEMENT\n\nCONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING\n\nParagraphs\n\nApplication......................................................Aus 0.1-Aus 0.2\n\nOperative Date.........................................................Aus 0.3\n\nIntroduction\n\nScope of this Auditing Standard..................................................1\n\nEffective Date...............................................................2\n\nObjective..................................................................3\n\nRequirements\n\nInventory.................................................................4-8\n\nLitigation and Claims........................................................9-12\n\nSegment Information.........................................................13\n\nApplication and Other Explanatory Material\n\nInventory..............................................................A1-A16\n\nLitigation and Claims....................................................A17-A25\n\nSegment Information....................................................A26-A27","sortOrder":3},{"sectionNumber":"COMPILATION DETAILS","sectionType":"part","heading":"COMPILATION DETAILS","content":"##### Obtaining a Copy of this Auditing Standard\n\nThe most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au\n\n##### Contact Details\n\n| Auditing and Assurance Standards BoardPhone: (03) 8080 7400E-mail: enquiries@auasb.gov.auPostal Address:PO Box 204Collins Street WestMelbourne Victoria 8007AUSTRALIA |\n| --------------------------------------------------------------------------------------------------------------------------------------------------------------------- |\n\n##### COPYRIGHT\n\n© 2023 Commonwealth of Australia. The text, graphics and layout of this Auditing Standard are protected by Australian copyright law and the comparable law of other countries. Reproduction within Australia in unaltered form (retaining this notice) is permitted for personal and non‑commercial use subject to the inclusion of an acknowledgment of the source as being the Australian Auditing and Assurance Standards Board (AUASB).\n\nRequests and enquiries concerning reproduction and rights for commercial purposes within Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to [enquiries@auasb.gov.au](mailto:enquiries@auasb.gov.au). Otherwise, no part of this Auditing Standard may be reproduced, stored or transmitted in any form or by any means without the prior written permission of the AUASB except as permitted by law.\n\nThis Auditing Standard reproduces substantial parts of the corresponding International Standard on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) and published by the International Federation of Accountants (IFAC), in the manner described in the statement on Conformity with International Standards on Auditing. The AUASB acknowledges that IFAC is the owner of copyright in the International Standard on Auditing incorporated in this Auditing Standard throughout the world.\n\nAll existing rights in this material are reserved outside Australia. Reproduction outside Australia in unaltered form (retaining this notice) is permitted for personal and non-commercial use only.\n\nFurther information and requests for authorisation to reproduce this Auditing Standard for commercial purposes outside Australia should be addressed to the Technical Director, Auditing and Assurance Standards Board, PO Box 204, Collins Street West, Melbourne, Victoria 8007 or sent to [enquiries@auasb.gov.au](mailto:enquiries@auasb.gov.au). Any decision to approve a request may also require the agreement of IFAC.\n\nISSN 1833-4393\n\n# CONTENTS\n\nCOMPILATION DETAILS\n\nAUTHORITY STATEMENT\n\nCONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING\n\nParagraphs\n\nApplication......................................................Aus 0.1-Aus 0.2\n\nOperative Date.........................................................Aus 0.3\n\nIntroduction\n\nScope of this Auditing Standard..................................................1\n\nEffective Date...............................................................2\n\nObjective..................................................................3\n\nRequirements\n\nInventory.................................................................4-8\n\nLitigation and Claims........................................................9-12\n\nSegment Information.........................................................13\n\nApplication and Other Explanatory Material\n\nInventory..............................................................A1-A16\n\nLitigation and Claims....................................................A17-A25\n\nSegment Information....................................................A26-A27\n\n  \n\n# COMPILATION DETAILS\n\n### Auditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information (as Amended)\n\nThis compilation takes into account amendments made up to and including 27 April 2022 and was prepared on 1 March 2023 by the Auditing and Assurance Standards Board (AUASB).\n\nThis compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 501 (October 2009) as amended by other Auditing Standards which are listed in the Table below.\n\n##### Table of Standards\n\n| Standard       | Date made       | Operative Date                                                         |\n| -------------- | --------------- | ---------------------------------------------------------------------- |\n| ASA 501 [A]    | 27 October 2009 | Financial reporting periods commencing on or after 1 January 2010      |\n| ASA 2011-1 [B] | 27 June 2011    | Financial reporting periods commencing on or after 1 July 2011         |\n| ASA 2020-1 [C] | 3 March 2020    | Financial reporting periods commencing on or after 15 December 2021[*] |\n| ASA 2022-1 [D] | 27 April 2022   | Financial reporting periods commencing on or after 15 December 2023    |\n\nLegislation History\n\n| Standard   | Registration Number | Registration Date | Commencement Date |\n| ---------- | ------------------- | ----------------- | ----------------- |\n| ASA 501    | F2009L04085         | 16 November 2009  | 17 November 2009  |\n| ASA 2011‑1 | F2011L01379         | 30 June 2011      | 1 July 2011       |\n| ASA 2020-1 | F2020L00252         | 13 March 2020     | 14 December 2021  |\n| ASA 2022-1 | F2022L00712         | 19 May 2022       | 14 December 2023  |\n\n  \n\n##### Table of Amendments\n\n| Paragraph affected | How affected | By … [paragraph] |\n| ------------------ | ------------ | ---------------- |\n| Aus 0.1(a)         | Amended      | ASA 2011-1 [34]  |\n| A4                 | Amended      | ASA 2020-1 [129] |\n| A3                 | Amended      | ASA 2022-1 [33]  |\n| A3Footnote 4       | Deleted      | ASA 2022-1 [33]  |\n\n  \n\n## AUTHORITY STATEMENT\n\nAuditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information (as amended to 27 April 2022) is set out in paragraphs Aus 0.1 to A27.\n\nThis Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.\n\n##### Conformity with International Standards on Auditing\n\nThis Auditing Standard conforms with the Inventory and Segment Information sections (paragraphs 1-8, 13, A1-A16 and A26-A27) of International Standard on Auditing ISA 501 Audit Evidence—Specific Considerations for Selected Items, issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board of the International Federation of Accountants (IFAC).\n\nThe other paragraphs of ISA 501 relating to Litigation and Claims (paragraphs 9-12 and A17-A25) are incorporated into ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims.\n\nThe AUASB has decided to continue to issue ASA 502 as a separate Auditing Standard, in the same way that the previous standard, ASA 508 Enquiry Regarding Litigation and Claims (April 2006), is a separate standard. ASA 508 contains requirements and guidance that the AUASB considers important to carry forward in the Australian Auditing Standards, and as a result, the revised standard is better suited to presentation as a separate standard.\n\nThis Auditing Standard, ASA 501, contains all the requirements and guidance contained in ISA 501 relating to Inventory and Segment Information. Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.\n\nCompliance with this Auditing Standard, in conjunction with ASA 502, enables compliance with ISA 501.","sortOrder":4},{"sectionNumber":"Auditing Standard ASA 501 Audit Evidence","sectionType":"division","heading":"Auditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information (as Amended)","content":"### Auditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information (as Amended)\n\nThis compilation takes into account amendments made up to and including 27 April 2022 and was prepared on 1 March 2023 by the Auditing and Assurance Standards Board (AUASB).\n\nThis compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 501 (October 2009) as amended by other Auditing Standards which are listed in the Table below.","sortOrder":5},{"sectionNumber":"Table of Standards","sectionType":"section","heading":"Table of Standards","content":"##### Table of Standards\n\n| Standard       | Date made       | Operative Date                                                         |\n| -------------- | --------------- | ---------------------------------------------------------------------- |\n| ASA 501 [A]    | 27 October 2009 | Financial reporting periods commencing on or after 1 January 2010      |\n| ASA 2011-1 [B] | 27 June 2011    | Financial reporting periods commencing on or after 1 July 2011         |\n| ASA 2020-1 [C] | 3 March 2020    | Financial reporting periods commencing on or after 15 December 2021[*] |\n| ASA 2022-1 [D] | 27 April 2022   | Financial reporting periods commencing on or after 15 December 2023    |\n\nLegislation History\n\n| Standard   | Registration Number | Registration Date | Commencement Date |\n| ---------- | ------------------- | ----------------- | ----------------- |\n| ASA 501    | F2009L04085         | 16 November 2009  | 17 November 2009  |\n| ASA 2011‑1 | F2011L01379         | 30 June 2011      | 1 July 2011       |\n| ASA 2020-1 | F2020L00252         | 13 March 2020     | 14 December 2021  |\n| ASA 2022-1 | F2022L00712         | 19 May 2022       | 14 December 2023  |","sortOrder":6},{"sectionNumber":"Table of Amendments","sectionType":"section","heading":"Table of Amendments","content":"##### Table of Amendments\n\n| Paragraph affected | How affected | By … [paragraph] |\n| ------------------ | ------------ | ---------------- |\n| Aus 0.1(a)         | Amended      | ASA 2011-1 [34]  |\n| A4                 | Amended      | ASA 2020-1 [129] |\n| A3                 | Amended      | ASA 2022-1 [33]  |\n| A3Footnote 4       | Deleted      | ASA 2022-1 [33]  |\n\n  \n\n## AUTHORITY STATEMENT\n\nAuditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information (as amended to 27 April 2022) is set out in paragraphs Aus 0.1 to A27.\n\nThis Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.\n\n##### Conformity with International Standards on Auditing\n\nThis Auditing Standard conforms with the Inventory and Segment Information sections (paragraphs 1-8, 13, A1-A16 and A26-A27) of International Standard on Auditing ISA 501 Audit Evidence—Specific Considerations for Selected Items, issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board of the International Federation of Accountants (IFAC).\n\nThe other paragraphs of ISA 501 relating to Litigation and Claims (paragraphs 9-12 and A17-A25) are incorporated into ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims.\n\nThe AUASB has decided to continue to issue ASA 502 as a separate Auditing Standard, in the same way that the previous standard, ASA 508 Enquiry Regarding Litigation and Claims (April 2006), is a separate standard. ASA 508 contains requirements and guidance that the AUASB considers important to carry forward in the Australian Auditing Standards, and as a result, the revised standard is better suited to presentation as a separate standard.\n\nThis Auditing Standard, ASA 501, contains all the requirements and guidance contained in ISA 501 relating to Inventory and Segment Information. Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.\n\nCompliance with this Auditing Standard, in conjunction with ASA 502, enables compliance with ISA 501.","sortOrder":7},{"sectionNumber":"AUTHORITY STATEMENT","sectionType":"part","heading":"AUTHORITY STATEMENT","content":"## AUTHORITY STATEMENT\n\nAuditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information (as amended to 27 April 2022) is set out in paragraphs Aus 0.1 to A27.\n\nThis Auditing Standard is to be read in conjunction with ASA 101 Preamble to AUASB Standards, which sets out how AUASB Standards are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.","sortOrder":8},{"sectionNumber":"Conformity with International Standards ","sectionType":"section","heading":"Conformity with International Standards on Auditing","content":"##### Conformity with International Standards on Auditing\n\nThis Auditing Standard conforms with the Inventory and Segment Information sections (paragraphs 1-8, 13, A1-A16 and A26-A27) of International Standard on Auditing ISA 501 Audit Evidence—Specific Considerations for Selected Items, issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting board of the International Federation of Accountants (IFAC).\n\nThe other paragraphs of ISA 501 relating to Litigation and Claims (paragraphs 9-12 and A17-A25) are incorporated into ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims.\n\nThe AUASB has decided to continue to issue ASA 502 as a separate Auditing Standard, in the same way that the previous standard, ASA 508 Enquiry Regarding Litigation and Claims (April 2006), is a separate standard. ASA 508 contains requirements and guidance that the AUASB considers important to carry forward in the Australian Auditing Standards, and as a result, the revised standard is better suited to presentation as a separate standard.\n\nThis Auditing Standard, ASA 501, contains all the requirements and guidance contained in ISA 501 relating to Inventory and Segment Information. Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.\n\nCompliance with this Auditing Standard, in conjunction with ASA 502, enables compliance with ISA 501.","sortOrder":9},{"sectionNumber":"Auditing Standard ASA 501","sectionType":"part","heading":"Auditing Standard ASA 501","content":"Auditing Standard ASA 501\n\nThe Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 27 October 2009.\n\nThis compiled version of ASA 501 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 27 April 2022 (see Compilation Details).\n\n## Auditing Standard ASA 501\n\n### Audit Evidence—Specific Considerations for Inventory and Segment Information\n\n##### Application\n\nAus 0.1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with the Corporations Act 2001; and\n\n(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.\n\nAus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.\n\n##### Operative Date\n\nAus 0.3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 January 2010. \\[Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n###### Scope of this Auditing Standard\n\n1.  This Auditing Standard deals with specific considerations by the auditor in obtaining sufficient appropriate audit evidence in accordance with ASA 330,1F[\\[1\\]](#_ftn2) ASA 5002F[\\[2\\]](#_ftn3) and other relevant Australian Auditing Standards, with respect to certain aspects of inventory and segment information in an audit of a financial report.\n\n###### Effective Date\n\n1.  \\[Deleted by the AUASB. Refer Aus 0.3\\]\n\n##### Objective\n\n1.  The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the:\n    1.  Existence and condition of inventory; and\n    2.  \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n    3.  Presentation and disclosure of segment information in accordance with the applicable financial reporting framework.\n\n##### Requirements\n\n###### Inventory\n\n1.  If inventory is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by:\n    1.  Attendance at physical inventory counting, unless impracticable, to: (Ref: Para. A1-A3)\n        1.  Evaluate management’s instructions and procedures for recording and controlling the results of the entity’s physical inventory counting;  \n            (Ref: Para. A4)\n        2.  Observe the performance of management’s count procedures; (Ref: Para. A5)\n        3.  Inspect the inventory; and (Ref: Para. A6)\n        4.  Perform test counts; and (Ref: Para. A7-A8)\n    2.  Performing audit procedures over the entity’s final inventory records to determine whether they accurately reflect actual inventory count results.\n2.  If physical inventory counting is conducted at a date other than the date of the financial report, the auditor shall, in addition to the procedures required by paragraph 4 of this Auditing Standard, perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial report are properly recorded. (Ref: Para. A9-A11)\n3.  If the auditor is unable to attend physical inventory counting due to unforeseen circumstances, the auditor shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions.\n4.  If attendance at physical inventory counting is impracticable, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory. If it is not possible to do so, the auditor shall modify the opinion in the auditor’s report in accordance with ASA 705.[\\[3\\]](#_ftn4)  \n    (Ref: Para. A12-A14)\n5.  If inventory under the custody and control of a third party is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by performing one or both of the following:\n    1.  Request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity. (Ref: Para. A15)\n    2.  Perform inspection or other audit procedures appropriate in the circumstances. (Ref: Para. A16)\n\n###### Litigation and Claims\n\n9.-12. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information\n\n13. The auditor shall obtain sufficient appropriate audit evidence regarding the presentation and disclosure of segment information in accordance with the applicable financial reporting framework by: (Ref: Para. A26)\n\n1.  Obtaining an understanding of the methods used by management in determining segment information, and:  \n    (Ref: Para. A27)\n    1.  Evaluating whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework; and\n    2.  Where appropriate, testing the application of such methods; and\n\n1.  Performing analytical procedures or other audit procedures appropriate in the circumstances.\n\n\\* \\* \\*\n\n##### Application and Other Explanatory Material\n\n###### Inventory\n\nAttendance at Physical Inventory Counting (Ref: Para. 4(a))\n\n1.  Management ordinarily establishes procedures under which inventory is physically counted at least once a year to serve as a basis for the preparation of the financial report and, if applicable, to ascertain the reliability of the entity’s perpetual inventory system.\n2.  Attendance at physical inventory counting involves:\n\n-   Inspecting the inventory to ascertain its existence and evaluate its condition, and performing test counts;\n-   Observing compliance with management’s instructions and the performance of procedures for recording and controlling the results of the physical inventory count; and\n-   Obtaining audit evidence as to the reliability of management’s count procedures.\n\nThese procedures may serve as test of controls or substantive procedures depending on the auditor’s risk assessment, planned approach and the specific procedures carried out.\n\n1.  Matters relevant in planning attendance at physical inventory counting (or in designing and performing audit procedures pursuant to paragraphs 4-8 of this Auditing Standard) include, for example:\n\n-   The risks of material misstatement related to inventory.\n-   The nature of the internal control related to inventory.\n-   Whether adequate procedures are expected to be established and proper instructions issued for physical inventory counting.\n-   The timing of physical inventory counting.\n-   Whether the entity maintains a perpetual inventory system.\n-   The locations at which inventory is held, including the materiality of the inventory and the risks of material misstatement at different locations, in deciding at which locations attendance is appropriate.\n-   Whether the assistance of an auditor’s expert is needed. ASA 620[\\[4\\]](#_ftn5) deals with the use of an auditor’s expert to assist the auditor to obtain sufficient appropriate audit evidence.\n\nEvaluate Management’s Instructions and Procedures (Ref: Para. 4(a)(i))\n\n1.  Matters relevant in evaluating management’s instructions and procedures for recording and controlling the physical inventory counting include whether they address, for example:\n\n-   The application of appropriate controls, for example, collection of used physical inventory count records, accounting for unused physical inventory count records, and count and re-count procedures.\n-   The accurate identification of the stage of completion of work in progress, of slow moving, obsolete or damaged items and of inventory owned by a third party, for example, on consignment.\n-   The procedures used to estimate physical quantities, where applicable, such as may be needed in estimating the physical quantity of a coal pile.\n-   Control over the movement of inventory between areas and the shipping and receipt of inventory before and after the cut-off date.\n\nObserve the Performance of Management’s Count Procedures  \n(Ref: Para. 4(a)(ii))\n\n1.  Observing the performance of management’s count procedures, for example those relating to control over the movement of inventory before, during and after the count, assists the auditor in obtaining audit evidence that management’s instructions and count procedures are adequately designed and implemented. In addition, the auditor may obtain copies of cut-off information, such as details of the movement of inventory, to assist the auditor in performing audit procedures over the accounting for such movements at a later date.\n\nInspect the Inventory (Ref: Para. 4(a)(iii))\n\n1.  Inspecting inventory when attending physical inventory counting assists the auditor in ascertaining the existence of the inventory (though not necessarily its ownership), and in identifying, for example, obsolete, damaged or ageing inventory.\n\nPerform Test Counts (Ref: Para. 4(a)(iv))\n\n1.  Performing test counts, for example by tracing items selected from management’s count records to the physical inventory and tracing items selected from the physical inventory to management’s count records, provides audit evidence about the completeness and the accuracy of those records.\n2.  In addition to recording the auditor’s test counts, obtaining copies of management’s completed physical inventory count records assists the auditor in performing subsequent audit procedures to determine whether the entity’s final inventory records accurately reflect actual inventory count results.\n\nPhysical Inventory Counting Conducted Other than At the Date of the Financial Report (Ref: Para. 5)\n\n1.  For practical reasons, the physical inventory counting may be conducted at a date, or dates, other than the date of the financial report. This may be done irrespective of whether management determines inventory quantities by an annual physical inventory counting or maintains a perpetual inventory system. In either case, the effectiveness of the design, implementation and maintenance of controls over changes in inventory determines whether the conduct of physical inventory counting at a date, or dates, other than the date of the financial report is appropriate for audit purposes. ASA 330 establishes requirements and provides guidance on substantive procedures performed at an interim date.[\\[5\\]](#_ftn6)\n2.  Where a perpetual inventory system is maintained, management may perform physical counts or other tests to ascertain the reliability of inventory quantity information included in the entity’s perpetual inventory records. In some cases, management or the auditor may identify differences between the perpetual inventory records and actual physical inventory quantities on hand; this may indicate that the controls over changes in inventory are not operating effectively.\n3.  Relevant matters for consideration when designing audit procedures to obtain audit evidence about whether changes in inventory amounts between the count date, or dates, and the final inventory records are properly recorded include:\n\n-   Whether the perpetual inventory records are properly adjusted.\n-   Reliability of the entity’s perpetual inventory records.\n-   Reasons for significant differences between the information obtained during the physical count and the perpetual inventory records.\n\nAttendance at Physical Inventory Counting Is Impracticable (Ref: Para. 7)\n\n1.  In some cases, attendance at physical inventory counting may be impracticable. This may be due to factors such as the nature and location of the inventory, for example, where inventory is held in a location that may pose threats to the safety of the auditor. The matter of general inconvenience to the auditor, however, is not sufficient to support a decision by the auditor that attendance is impracticable. Further, as explained in ASA 200,[\\[6\\]](#_ftn7) the matter of difficulty, time, or cost involved is not in itself a valid basis for the auditor to omit an audit procedure for which there is no alternative or to be satisfied with audit evidence that is less than persuasive.\n2.  In some cases where attendance is impracticable, alternative audit procedures, for example inspection of documentation of the subsequent sale of specific inventory items acquired or purchased prior to the physical inventory counting, may provide sufficient appropriate audit evidence about the existence and condition of inventory.\n3.  In other cases, however, it may not be possible to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by performing alternative audit procedures. In such cases, ASA 705 requires the auditor to modify the opinion in the auditor’s report as a result of the scope limitation.[\\[7\\]](#_ftn8)\n\nInventory under the Custody and Control of a Third Party\n\nConfirmation (Ref: Para. 8(a))\n\n1.  ASA 505[\\[8\\]](#_ftn9) establishes requirements and provides guidance for performing external confirmation procedures.\n\nOther Audit Procedures (Ref: Para. 8(b))\n\n1.  Depending on the circumstances, for example where information is obtained that raises doubt about the integrity and objectivity of the third party, the auditor may consider it appropriate to perform other audit procedures instead of, or in addition to, confirmation with the third party. Examples of other audit procedures include:\n\n-   Attending, or arranging for another auditor to attend, the third party’s physical counting of inventory, if practicable.\n-   Obtaining another auditor’s report, or a service auditor’s report, on the adequacy of the third party’s internal control for ensuring that inventory is properly counted and adequately safeguarded.\n-   Inspecting documentation regarding inventory held by third parties, for example, warehouse receipts.\n-   Requesting confirmation from other parties when inventory has been pledged as collateral.\n\n###### Litigation and Claims\n\nA17.-A25. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information (Ref: Para. 13)\n\nA26. Depending on the applicable financial reporting framework, the entity may be required or permitted to disclose segment information in the financial report. The auditor’s responsibility regarding the presentation and disclosure of segment information is in relation to the financial report taken as a whole. Accordingly, the auditor is not required to perform audit procedures that would be necessary to express an opinion on the segment information presented on a  \nstand-alone basis.\n\nUnderstanding of the Methods Used by Management (Ref: Para. 13(a))\n\nA27. Depending on the circumstances, example of matters that may be relevant when obtaining an understanding of the methods used by management in determining segment information and whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework include:\n\n-   Sales, transfers and charges between segments, and elimination of inter-segment amounts.\n-   Comparisons with budgets and other expected results, for example, operating profits as a percentage of sales.\n-   The allocation of assets and costs among segments.\n-   Consistency with prior periods, and the adequacy of the disclosures with respect to inconsistencies.","sortOrder":10},{"sectionNumber":"Audit Evidence—Specific Considerations f","sectionType":"division","heading":"Audit Evidence—Specific Considerations for Inventory and Segment Information","content":"Auditing Standard ASA 501\n\nThe Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 27 October 2009.\n\nThis compiled version of ASA 501 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 27 April 2022 (see Compilation Details).\n\n## Auditing Standard ASA 501\n\n### Audit Evidence—Specific Considerations for Inventory and Segment Information\n\n##### Application\n\nAus 0.1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with the Corporations Act 2001; and\n\n(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.\n\nAus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.\n\n##### Operative Date\n\nAus 0.3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 January 2010. \\[Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n###### Scope of this Auditing Standard\n\n1.  This Auditing Standard deals with specific considerations by the auditor in obtaining sufficient appropriate audit evidence in accordance with ASA 330,1F[\\[1\\]](#_ftn2) ASA 5002F[\\[2\\]](#_ftn3) and other relevant Australian Auditing Standards, with respect to certain aspects of inventory and segment information in an audit of a financial report.\n\n###### Effective Date\n\n1.  \\[Deleted by the AUASB. Refer Aus 0.3\\]\n\n##### Objective\n\n1.  The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the:\n    1.  Existence and condition of inventory; and\n    2.  \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n    3.  Presentation and disclosure of segment information in accordance with the applicable financial reporting framework.\n\n##### Requirements\n\n###### Inventory\n\n1.  If inventory is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by:\n    1.  Attendance at physical inventory counting, unless impracticable, to: (Ref: Para. A1-A3)\n        1.  Evaluate management’s instructions and procedures for recording and controlling the results of the entity’s physical inventory counting;  \n            (Ref: Para. A4)\n        2.  Observe the performance of management’s count procedures; (Ref: Para. A5)\n        3.  Inspect the inventory; and (Ref: Para. A6)\n        4.  Perform test counts; and (Ref: Para. A7-A8)\n    2.  Performing audit procedures over the entity’s final inventory records to determine whether they accurately reflect actual inventory count results.\n2.  If physical inventory counting is conducted at a date other than the date of the financial report, the auditor shall, in addition to the procedures required by paragraph 4 of this Auditing Standard, perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial report are properly recorded. (Ref: Para. A9-A11)\n3.  If the auditor is unable to attend physical inventory counting due to unforeseen circumstances, the auditor shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions.\n4.  If attendance at physical inventory counting is impracticable, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory. If it is not possible to do so, the auditor shall modify the opinion in the auditor’s report in accordance with ASA 705.[\\[3\\]](#_ftn4)  \n    (Ref: Para. A12-A14)\n5.  If inventory under the custody and control of a third party is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by performing one or both of the following:\n    1.  Request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity. (Ref: Para. A15)\n    2.  Perform inspection or other audit procedures appropriate in the circumstances. (Ref: Para. A16)\n\n###### Litigation and Claims\n\n9.-12. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information\n\n13. The auditor shall obtain sufficient appropriate audit evidence regarding the presentation and disclosure of segment information in accordance with the applicable financial reporting framework by: (Ref: Para. A26)\n\n1.  Obtaining an understanding of the methods used by management in determining segment information, and:  \n    (Ref: Para. A27)\n    1.  Evaluating whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework; and\n    2.  Where appropriate, testing the application of such methods; and\n\n1.  Performing analytical procedures or other audit procedures appropriate in the circumstances.\n\n\\* \\* \\*\n\n##### Application and Other Explanatory Material\n\n###### Inventory\n\nAttendance at Physical Inventory Counting (Ref: Para. 4(a))\n\n1.  Management ordinarily establishes procedures under which inventory is physically counted at least once a year to serve as a basis for the preparation of the financial report and, if applicable, to ascertain the reliability of the entity’s perpetual inventory system.\n2.  Attendance at physical inventory counting involves:\n\n-   Inspecting the inventory to ascertain its existence and evaluate its condition, and performing test counts;\n-   Observing compliance with management’s instructions and the performance of procedures for recording and controlling the results of the physical inventory count; and\n-   Obtaining audit evidence as to the reliability of management’s count procedures.\n\nThese procedures may serve as test of controls or substantive procedures depending on the auditor’s risk assessment, planned approach and the specific procedures carried out.\n\n1.  Matters relevant in planning attendance at physical inventory counting (or in designing and performing audit procedures pursuant to paragraphs 4-8 of this Auditing Standard) include, for example:\n\n-   The risks of material misstatement related to inventory.\n-   The nature of the internal control related to inventory.\n-   Whether adequate procedures are expected to be established and proper instructions issued for physical inventory counting.\n-   The timing of physical inventory counting.\n-   Whether the entity maintains a perpetual inventory system.\n-   The locations at which inventory is held, including the materiality of the inventory and the risks of material misstatement at different locations, in deciding at which locations attendance is appropriate.\n-   Whether the assistance of an auditor’s expert is needed. ASA 620[\\[4\\]](#_ftn5) deals with the use of an auditor’s expert to assist the auditor to obtain sufficient appropriate audit evidence.\n\nEvaluate Management’s Instructions and Procedures (Ref: Para. 4(a)(i))\n\n1.  Matters relevant in evaluating management’s instructions and procedures for recording and controlling the physical inventory counting include whether they address, for example:\n\n-   The application of appropriate controls, for example, collection of used physical inventory count records, accounting for unused physical inventory count records, and count and re-count procedures.\n-   The accurate identification of the stage of completion of work in progress, of slow moving, obsolete or damaged items and of inventory owned by a third party, for example, on consignment.\n-   The procedures used to estimate physical quantities, where applicable, such as may be needed in estimating the physical quantity of a coal pile.\n-   Control over the movement of inventory between areas and the shipping and receipt of inventory before and after the cut-off date.\n\nObserve the Performance of Management’s Count Procedures  \n(Ref: Para. 4(a)(ii))\n\n1.  Observing the performance of management’s count procedures, for example those relating to control over the movement of inventory before, during and after the count, assists the auditor in obtaining audit evidence that management’s instructions and count procedures are adequately designed and implemented. In addition, the auditor may obtain copies of cut-off information, such as details of the movement of inventory, to assist the auditor in performing audit procedures over the accounting for such movements at a later date.\n\nInspect the Inventory (Ref: Para. 4(a)(iii))\n\n1.  Inspecting inventory when attending physical inventory counting assists the auditor in ascertaining the existence of the inventory (though not necessarily its ownership), and in identifying, for example, obsolete, damaged or ageing inventory.\n\nPerform Test Counts (Ref: Para. 4(a)(iv))\n\n1.  Performing test counts, for example by tracing items selected from management’s count records to the physical inventory and tracing items selected from the physical inventory to management’s count records, provides audit evidence about the completeness and the accuracy of those records.\n2.  In addition to recording the auditor’s test counts, obtaining copies of management’s completed physical inventory count records assists the auditor in performing subsequent audit procedures to determine whether the entity’s final inventory records accurately reflect actual inventory count results.\n\nPhysical Inventory Counting Conducted Other than At the Date of the Financial Report (Ref: Para. 5)\n\n1.  For practical reasons, the physical inventory counting may be conducted at a date, or dates, other than the date of the financial report. This may be done irrespective of whether management determines inventory quantities by an annual physical inventory counting or maintains a perpetual inventory system. In either case, the effectiveness of the design, implementation and maintenance of controls over changes in inventory determines whether the conduct of physical inventory counting at a date, or dates, other than the date of the financial report is appropriate for audit purposes. ASA 330 establishes requirements and provides guidance on substantive procedures performed at an interim date.[\\[5\\]](#_ftn6)\n2.  Where a perpetual inventory system is maintained, management may perform physical counts or other tests to ascertain the reliability of inventory quantity information included in the entity’s perpetual inventory records. In some cases, management or the auditor may identify differences between the perpetual inventory records and actual physical inventory quantities on hand; this may indicate that the controls over changes in inventory are not operating effectively.\n3.  Relevant matters for consideration when designing audit procedures to obtain audit evidence about whether changes in inventory amounts between the count date, or dates, and the final inventory records are properly recorded include:\n\n-   Whether the perpetual inventory records are properly adjusted.\n-   Reliability of the entity’s perpetual inventory records.\n-   Reasons for significant differences between the information obtained during the physical count and the perpetual inventory records.\n\nAttendance at Physical Inventory Counting Is Impracticable (Ref: Para. 7)\n\n1.  In some cases, attendance at physical inventory counting may be impracticable. This may be due to factors such as the nature and location of the inventory, for example, where inventory is held in a location that may pose threats to the safety of the auditor. The matter of general inconvenience to the auditor, however, is not sufficient to support a decision by the auditor that attendance is impracticable. Further, as explained in ASA 200,[\\[6\\]](#_ftn7) the matter of difficulty, time, or cost involved is not in itself a valid basis for the auditor to omit an audit procedure for which there is no alternative or to be satisfied with audit evidence that is less than persuasive.\n2.  In some cases where attendance is impracticable, alternative audit procedures, for example inspection of documentation of the subsequent sale of specific inventory items acquired or purchased prior to the physical inventory counting, may provide sufficient appropriate audit evidence about the existence and condition of inventory.\n3.  In other cases, however, it may not be possible to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by performing alternative audit procedures. In such cases, ASA 705 requires the auditor to modify the opinion in the auditor’s report as a result of the scope limitation.[\\[7\\]](#_ftn8)\n\nInventory under the Custody and Control of a Third Party\n\nConfirmation (Ref: Para. 8(a))\n\n1.  ASA 505[\\[8\\]](#_ftn9) establishes requirements and provides guidance for performing external confirmation procedures.\n\nOther Audit Procedures (Ref: Para. 8(b))\n\n1.  Depending on the circumstances, for example where information is obtained that raises doubt about the integrity and objectivity of the third party, the auditor may consider it appropriate to perform other audit procedures instead of, or in addition to, confirmation with the third party. Examples of other audit procedures include:\n\n-   Attending, or arranging for another auditor to attend, the third party’s physical counting of inventory, if practicable.\n-   Obtaining another auditor’s report, or a service auditor’s report, on the adequacy of the third party’s internal control for ensuring that inventory is properly counted and adequately safeguarded.\n-   Inspecting documentation regarding inventory held by third parties, for example, warehouse receipts.\n-   Requesting confirmation from other parties when inventory has been pledged as collateral.\n\n###### Litigation and Claims\n\nA17.-A25. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information (Ref: Para. 13)\n\nA26. Depending on the applicable financial reporting framework, the entity may be required or permitted to disclose segment information in the financial report. The auditor’s responsibility regarding the presentation and disclosure of segment information is in relation to the financial report taken as a whole. Accordingly, the auditor is not required to perform audit procedures that would be necessary to express an opinion on the segment information presented on a  \nstand-alone basis.\n\nUnderstanding of the Methods Used by Management (Ref: Para. 13(a))\n\nA27. Depending on the circumstances, example of matters that may be relevant when obtaining an understanding of the methods used by management in determining segment information and whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework include:\n\n-   Sales, transfers and charges between segments, and elimination of inter-segment amounts.\n-   Comparisons with budgets and other expected results, for example, operating profits as a percentage of sales.\n-   The allocation of assets and costs among segments.\n-   Consistency with prior periods, and the adequacy of the disclosures with respect to inconsistencies.","sortOrder":11},{"sectionNumber":"Application","sectionType":"section","heading":"Application","content":"##### Application\n\nAus 0.1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with the Corporations Act 2001; and\n\n(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.\n\nAus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.","sortOrder":12},{"sectionNumber":"Operative Date","sectionType":"section","heading":"Operative Date","content":"##### Operative Date\n\nAus 0.3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 January 2010. \\[Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilation Details.\\]","sortOrder":13},{"sectionNumber":"Introduction","sectionType":"section","heading":"Introduction","content":"Auditing Standard ASA 501\n\nThe Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 27 October 2009.\n\nThis compiled version of ASA 501 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 27 April 2022 (see Compilation Details).\n\n## Auditing Standard ASA 501\n\n### Audit Evidence—Specific Considerations for Inventory and Segment Information\n\n##### Application\n\nAus 0.1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with the Corporations Act 2001; and\n\n(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.\n\nAus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.\n\n##### Operative Date\n\nAus 0.3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 January 2010. \\[Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n###### Scope of this Auditing Standard\n\n1.  This Auditing Standard deals with specific considerations by the auditor in obtaining sufficient appropriate audit evidence in accordance with ASA 330,1F[\\[1\\]](#_ftn2) ASA 5002F[\\[2\\]](#_ftn3) and other relevant Australian Auditing Standards, with respect to certain aspects of inventory and segment information in an audit of a financial report.\n\n###### Effective Date\n\n1.  \\[Deleted by the AUASB. Refer Aus 0.3\\]\n\n##### Objective\n\n1.  The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the:\n    1.  Existence and condition of inventory; and\n    2.  \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n    3.  Presentation and disclosure of segment information in accordance with the applicable financial reporting framework.\n\n##### Requirements\n\n###### Inventory\n\n1.  If inventory is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by:\n    1.  Attendance at physical inventory counting, unless impracticable, to: (Ref: Para. A1-A3)\n        1.  Evaluate management’s instructions and procedures for recording and controlling the results of the entity’s physical inventory counting;  \n            (Ref: Para. A4)\n        2.  Observe the performance of management’s count procedures; (Ref: Para. A5)\n        3.  Inspect the inventory; and (Ref: Para. A6)\n        4.  Perform test counts; and (Ref: Para. A7-A8)\n    2.  Performing audit procedures over the entity’s final inventory records to determine whether they accurately reflect actual inventory count results.\n2.  If physical inventory counting is conducted at a date other than the date of the financial report, the auditor shall, in addition to the procedures required by paragraph 4 of this Auditing Standard, perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial report are properly recorded. (Ref: Para. A9-A11)\n3.  If the auditor is unable to attend physical inventory counting due to unforeseen circumstances, the auditor shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions.\n4.  If attendance at physical inventory counting is impracticable, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory. If it is not possible to do so, the auditor shall modify the opinion in the auditor’s report in accordance with ASA 705.[\\[3\\]](#_ftn4)  \n    (Ref: Para. A12-A14)\n5.  If inventory under the custody and control of a third party is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by performing one or both of the following:\n    1.  Request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity. (Ref: Para. A15)\n    2.  Perform inspection or other audit procedures appropriate in the circumstances. (Ref: Para. A16)\n\n###### Litigation and Claims\n\n9.-12. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information\n\n13. The auditor shall obtain sufficient appropriate audit evidence regarding the presentation and disclosure of segment information in accordance with the applicable financial reporting framework by: (Ref: Para. A26)\n\n1.  Obtaining an understanding of the methods used by management in determining segment information, and:  \n    (Ref: Para. A27)\n    1.  Evaluating whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework; and\n    2.  Where appropriate, testing the application of such methods; and\n\n1.  Performing analytical procedures or other audit procedures appropriate in the circumstances.\n\n\\* \\* \\*\n\n##### Application and Other Explanatory Material\n\n###### Inventory\n\nAttendance at Physical Inventory Counting (Ref: Para. 4(a))\n\n1.  Management ordinarily establishes procedures under which inventory is physically counted at least once a year to serve as a basis for the preparation of the financial report and, if applicable, to ascertain the reliability of the entity’s perpetual inventory system.\n2.  Attendance at physical inventory counting involves:\n\n-   Inspecting the inventory to ascertain its existence and evaluate its condition, and performing test counts;\n-   Observing compliance with management’s instructions and the performance of procedures for recording and controlling the results of the physical inventory count; and\n-   Obtaining audit evidence as to the reliability of management’s count procedures.\n\nThese procedures may serve as test of controls or substantive procedures depending on the auditor’s risk assessment, planned approach and the specific procedures carried out.\n\n1.  Matters relevant in planning attendance at physical inventory counting (or in designing and performing audit procedures pursuant to paragraphs 4-8 of this Auditing Standard) include, for example:\n\n-   The risks of material misstatement related to inventory.\n-   The nature of the internal control related to inventory.\n-   Whether adequate procedures are expected to be established and proper instructions issued for physical inventory counting.\n-   The timing of physical inventory counting.\n-   Whether the entity maintains a perpetual inventory system.\n-   The locations at which inventory is held, including the materiality of the inventory and the risks of material misstatement at different locations, in deciding at which locations attendance is appropriate.\n-   Whether the assistance of an auditor’s expert is needed. ASA 620[\\[4\\]](#_ftn5) deals with the use of an auditor’s expert to assist the auditor to obtain sufficient appropriate audit evidence.\n\nEvaluate Management’s Instructions and Procedures (Ref: Para. 4(a)(i))\n\n1.  Matters relevant in evaluating management’s instructions and procedures for recording and controlling the physical inventory counting include whether they address, for example:\n\n-   The application of appropriate controls, for example, collection of used physical inventory count records, accounting for unused physical inventory count records, and count and re-count procedures.\n-   The accurate identification of the stage of completion of work in progress, of slow moving, obsolete or damaged items and of inventory owned by a third party, for example, on consignment.\n-   The procedures used to estimate physical quantities, where applicable, such as may be needed in estimating the physical quantity of a coal pile.\n-   Control over the movement of inventory between areas and the shipping and receipt of inventory before and after the cut-off date.\n\nObserve the Performance of Management’s Count Procedures  \n(Ref: Para. 4(a)(ii))\n\n1.  Observing the performance of management’s count procedures, for example those relating to control over the movement of inventory before, during and after the count, assists the auditor in obtaining audit evidence that management’s instructions and count procedures are adequately designed and implemented. In addition, the auditor may obtain copies of cut-off information, such as details of the movement of inventory, to assist the auditor in performing audit procedures over the accounting for such movements at a later date.\n\nInspect the Inventory (Ref: Para. 4(a)(iii))\n\n1.  Inspecting inventory when attending physical inventory counting assists the auditor in ascertaining the existence of the inventory (though not necessarily its ownership), and in identifying, for example, obsolete, damaged or ageing inventory.\n\nPerform Test Counts (Ref: Para. 4(a)(iv))\n\n1.  Performing test counts, for example by tracing items selected from management’s count records to the physical inventory and tracing items selected from the physical inventory to management’s count records, provides audit evidence about the completeness and the accuracy of those records.\n2.  In addition to recording the auditor’s test counts, obtaining copies of management’s completed physical inventory count records assists the auditor in performing subsequent audit procedures to determine whether the entity’s final inventory records accurately reflect actual inventory count results.\n\nPhysical Inventory Counting Conducted Other than At the Date of the Financial Report (Ref: Para. 5)\n\n1.  For practical reasons, the physical inventory counting may be conducted at a date, or dates, other than the date of the financial report. This may be done irrespective of whether management determines inventory quantities by an annual physical inventory counting or maintains a perpetual inventory system. In either case, the effectiveness of the design, implementation and maintenance of controls over changes in inventory determines whether the conduct of physical inventory counting at a date, or dates, other than the date of the financial report is appropriate for audit purposes. ASA 330 establishes requirements and provides guidance on substantive procedures performed at an interim date.[\\[5\\]](#_ftn6)\n2.  Where a perpetual inventory system is maintained, management may perform physical counts or other tests to ascertain the reliability of inventory quantity information included in the entity’s perpetual inventory records. In some cases, management or the auditor may identify differences between the perpetual inventory records and actual physical inventory quantities on hand; this may indicate that the controls over changes in inventory are not operating effectively.\n3.  Relevant matters for consideration when designing audit procedures to obtain audit evidence about whether changes in inventory amounts between the count date, or dates, and the final inventory records are properly recorded include:\n\n-   Whether the perpetual inventory records are properly adjusted.\n-   Reliability of the entity’s perpetual inventory records.\n-   Reasons for significant differences between the information obtained during the physical count and the perpetual inventory records.\n\nAttendance at Physical Inventory Counting Is Impracticable (Ref: Para. 7)\n\n1.  In some cases, attendance at physical inventory counting may be impracticable. This may be due to factors such as the nature and location of the inventory, for example, where inventory is held in a location that may pose threats to the safety of the auditor. The matter of general inconvenience to the auditor, however, is not sufficient to support a decision by the auditor that attendance is impracticable. Further, as explained in ASA 200,[\\[6\\]](#_ftn7) the matter of difficulty, time, or cost involved is not in itself a valid basis for the auditor to omit an audit procedure for which there is no alternative or to be satisfied with audit evidence that is less than persuasive.\n2.  In some cases where attendance is impracticable, alternative audit procedures, for example inspection of documentation of the subsequent sale of specific inventory items acquired or purchased prior to the physical inventory counting, may provide sufficient appropriate audit evidence about the existence and condition of inventory.\n3.  In other cases, however, it may not be possible to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by performing alternative audit procedures. In such cases, ASA 705 requires the auditor to modify the opinion in the auditor’s report as a result of the scope limitation.[\\[7\\]](#_ftn8)\n\nInventory under the Custody and Control of a Third Party\n\nConfirmation (Ref: Para. 8(a))\n\n1.  ASA 505[\\[8\\]](#_ftn9) establishes requirements and provides guidance for performing external confirmation procedures.\n\nOther Audit Procedures (Ref: Para. 8(b))\n\n1.  Depending on the circumstances, for example where information is obtained that raises doubt about the integrity and objectivity of the third party, the auditor may consider it appropriate to perform other audit procedures instead of, or in addition to, confirmation with the third party. Examples of other audit procedures include:\n\n-   Attending, or arranging for another auditor to attend, the third party’s physical counting of inventory, if practicable.\n-   Obtaining another auditor’s report, or a service auditor’s report, on the adequacy of the third party’s internal control for ensuring that inventory is properly counted and adequately safeguarded.\n-   Inspecting documentation regarding inventory held by third parties, for example, warehouse receipts.\n-   Requesting confirmation from other parties when inventory has been pledged as collateral.\n\n###### Litigation and Claims\n\nA17.-A25. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information (Ref: Para. 13)\n\nA26. Depending on the applicable financial reporting framework, the entity may be required or permitted to disclose segment information in the financial report. The auditor’s responsibility regarding the presentation and disclosure of segment information is in relation to the financial report taken as a whole. Accordingly, the auditor is not required to perform audit procedures that would be necessary to express an opinion on the segment information presented on a  \nstand-alone basis.\n\nUnderstanding of the Methods Used by Management (Ref: Para. 13(a))\n\nA27. Depending on the circumstances, example of matters that may be relevant when obtaining an understanding of the methods used by management in determining segment information and whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework include:\n\n-   Sales, transfers and charges between segments, and elimination of inter-segment amounts.\n-   Comparisons with budgets and other expected results, for example, operating profits as a percentage of sales.\n-   The allocation of assets and costs among segments.\n-   Consistency with prior periods, and the adequacy of the disclosures with respect to inconsistencies.","sortOrder":14},{"sectionNumber":"Scope of this Auditing Standard","sectionType":"section","heading":"Scope of this Auditing Standard","content":"###### Scope of this Auditing Standard\n\n1.  This Auditing Standard deals with specific considerations by the auditor in obtaining sufficient appropriate audit evidence in accordance with ASA 330,1F[\\[1\\]](#_ftn2) ASA 5002F[\\[2\\]](#_ftn3) and other relevant Australian Auditing Standards, with respect to certain aspects of inventory and segment information in an audit of a financial report.","sortOrder":15},{"sectionNumber":"Effective Date","sectionType":"section","heading":"Effective Date","content":"###### Effective Date\n\n1.  \\[Deleted by the AUASB. Refer Aus 0.3\\]","sortOrder":16},{"sectionNumber":"Objective","sectionType":"section","heading":"Objective","content":"##### Objective\n\n1.  The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the:\n    1.  Existence and condition of inventory; and\n    2.  \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n    3.  Presentation and disclosure of segment information in accordance with the applicable financial reporting framework.","sortOrder":17},{"sectionNumber":"Requirements","sectionType":"section","heading":"Requirements","content":"Auditing Standard ASA 501\n\nThe Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 27 October 2009.\n\nThis compiled version of ASA 501 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 27 April 2022 (see Compilation Details).\n\n## Auditing Standard ASA 501\n\n### Audit Evidence—Specific Considerations for Inventory and Segment Information\n\n##### Application\n\nAus 0.1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with the Corporations Act 2001; and\n\n(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.\n\nAus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.\n\n##### Operative Date\n\nAus 0.3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 January 2010. \\[Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n###### Scope of this Auditing Standard\n\n1.  This Auditing Standard deals with specific considerations by the auditor in obtaining sufficient appropriate audit evidence in accordance with ASA 330,1F[\\[1\\]](#_ftn2) ASA 5002F[\\[2\\]](#_ftn3) and other relevant Australian Auditing Standards, with respect to certain aspects of inventory and segment information in an audit of a financial report.\n\n###### Effective Date\n\n1.  \\[Deleted by the AUASB. Refer Aus 0.3\\]\n\n##### Objective\n\n1.  The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the:\n    1.  Existence and condition of inventory; and\n    2.  \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n    3.  Presentation and disclosure of segment information in accordance with the applicable financial reporting framework.\n\n##### Requirements\n\n###### Inventory\n\n1.  If inventory is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by:\n    1.  Attendance at physical inventory counting, unless impracticable, to: (Ref: Para. A1-A3)\n        1.  Evaluate management’s instructions and procedures for recording and controlling the results of the entity’s physical inventory counting;  \n            (Ref: Para. A4)\n        2.  Observe the performance of management’s count procedures; (Ref: Para. A5)\n        3.  Inspect the inventory; and (Ref: Para. A6)\n        4.  Perform test counts; and (Ref: Para. A7-A8)\n    2.  Performing audit procedures over the entity’s final inventory records to determine whether they accurately reflect actual inventory count results.\n2.  If physical inventory counting is conducted at a date other than the date of the financial report, the auditor shall, in addition to the procedures required by paragraph 4 of this Auditing Standard, perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial report are properly recorded. (Ref: Para. A9-A11)\n3.  If the auditor is unable to attend physical inventory counting due to unforeseen circumstances, the auditor shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions.\n4.  If attendance at physical inventory counting is impracticable, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory. If it is not possible to do so, the auditor shall modify the opinion in the auditor’s report in accordance with ASA 705.[\\[3\\]](#_ftn4)  \n    (Ref: Para. A12-A14)\n5.  If inventory under the custody and control of a third party is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by performing one or both of the following:\n    1.  Request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity. (Ref: Para. A15)\n    2.  Perform inspection or other audit procedures appropriate in the circumstances. (Ref: Para. A16)\n\n###### Litigation and Claims\n\n9.-12. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information\n\n13. The auditor shall obtain sufficient appropriate audit evidence regarding the presentation and disclosure of segment information in accordance with the applicable financial reporting framework by: (Ref: Para. A26)\n\n1.  Obtaining an understanding of the methods used by management in determining segment information, and:  \n    (Ref: Para. A27)\n    1.  Evaluating whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework; and\n    2.  Where appropriate, testing the application of such methods; and\n\n1.  Performing analytical procedures or other audit procedures appropriate in the circumstances.\n\n\\* \\* \\*\n\n##### Application and Other Explanatory Material\n\n###### Inventory\n\nAttendance at Physical Inventory Counting (Ref: Para. 4(a))\n\n1.  Management ordinarily establishes procedures under which inventory is physically counted at least once a year to serve as a basis for the preparation of the financial report and, if applicable, to ascertain the reliability of the entity’s perpetual inventory system.\n2.  Attendance at physical inventory counting involves:\n\n-   Inspecting the inventory to ascertain its existence and evaluate its condition, and performing test counts;\n-   Observing compliance with management’s instructions and the performance of procedures for recording and controlling the results of the physical inventory count; and\n-   Obtaining audit evidence as to the reliability of management’s count procedures.\n\nThese procedures may serve as test of controls or substantive procedures depending on the auditor’s risk assessment, planned approach and the specific procedures carried out.\n\n1.  Matters relevant in planning attendance at physical inventory counting (or in designing and performing audit procedures pursuant to paragraphs 4-8 of this Auditing Standard) include, for example:\n\n-   The risks of material misstatement related to inventory.\n-   The nature of the internal control related to inventory.\n-   Whether adequate procedures are expected to be established and proper instructions issued for physical inventory counting.\n-   The timing of physical inventory counting.\n-   Whether the entity maintains a perpetual inventory system.\n-   The locations at which inventory is held, including the materiality of the inventory and the risks of material misstatement at different locations, in deciding at which locations attendance is appropriate.\n-   Whether the assistance of an auditor’s expert is needed. ASA 620[\\[4\\]](#_ftn5) deals with the use of an auditor’s expert to assist the auditor to obtain sufficient appropriate audit evidence.\n\nEvaluate Management’s Instructions and Procedures (Ref: Para. 4(a)(i))\n\n1.  Matters relevant in evaluating management’s instructions and procedures for recording and controlling the physical inventory counting include whether they address, for example:\n\n-   The application of appropriate controls, for example, collection of used physical inventory count records, accounting for unused physical inventory count records, and count and re-count procedures.\n-   The accurate identification of the stage of completion of work in progress, of slow moving, obsolete or damaged items and of inventory owned by a third party, for example, on consignment.\n-   The procedures used to estimate physical quantities, where applicable, such as may be needed in estimating the physical quantity of a coal pile.\n-   Control over the movement of inventory between areas and the shipping and receipt of inventory before and after the cut-off date.\n\nObserve the Performance of Management’s Count Procedures  \n(Ref: Para. 4(a)(ii))\n\n1.  Observing the performance of management’s count procedures, for example those relating to control over the movement of inventory before, during and after the count, assists the auditor in obtaining audit evidence that management’s instructions and count procedures are adequately designed and implemented. In addition, the auditor may obtain copies of cut-off information, such as details of the movement of inventory, to assist the auditor in performing audit procedures over the accounting for such movements at a later date.\n\nInspect the Inventory (Ref: Para. 4(a)(iii))\n\n1.  Inspecting inventory when attending physical inventory counting assists the auditor in ascertaining the existence of the inventory (though not necessarily its ownership), and in identifying, for example, obsolete, damaged or ageing inventory.\n\nPerform Test Counts (Ref: Para. 4(a)(iv))\n\n1.  Performing test counts, for example by tracing items selected from management’s count records to the physical inventory and tracing items selected from the physical inventory to management’s count records, provides audit evidence about the completeness and the accuracy of those records.\n2.  In addition to recording the auditor’s test counts, obtaining copies of management’s completed physical inventory count records assists the auditor in performing subsequent audit procedures to determine whether the entity’s final inventory records accurately reflect actual inventory count results.\n\nPhysical Inventory Counting Conducted Other than At the Date of the Financial Report (Ref: Para. 5)\n\n1.  For practical reasons, the physical inventory counting may be conducted at a date, or dates, other than the date of the financial report. This may be done irrespective of whether management determines inventory quantities by an annual physical inventory counting or maintains a perpetual inventory system. In either case, the effectiveness of the design, implementation and maintenance of controls over changes in inventory determines whether the conduct of physical inventory counting at a date, or dates, other than the date of the financial report is appropriate for audit purposes. ASA 330 establishes requirements and provides guidance on substantive procedures performed at an interim date.[\\[5\\]](#_ftn6)\n2.  Where a perpetual inventory system is maintained, management may perform physical counts or other tests to ascertain the reliability of inventory quantity information included in the entity’s perpetual inventory records. In some cases, management or the auditor may identify differences between the perpetual inventory records and actual physical inventory quantities on hand; this may indicate that the controls over changes in inventory are not operating effectively.\n3.  Relevant matters for consideration when designing audit procedures to obtain audit evidence about whether changes in inventory amounts between the count date, or dates, and the final inventory records are properly recorded include:\n\n-   Whether the perpetual inventory records are properly adjusted.\n-   Reliability of the entity’s perpetual inventory records.\n-   Reasons for significant differences between the information obtained during the physical count and the perpetual inventory records.\n\nAttendance at Physical Inventory Counting Is Impracticable (Ref: Para. 7)\n\n1.  In some cases, attendance at physical inventory counting may be impracticable. This may be due to factors such as the nature and location of the inventory, for example, where inventory is held in a location that may pose threats to the safety of the auditor. The matter of general inconvenience to the auditor, however, is not sufficient to support a decision by the auditor that attendance is impracticable. Further, as explained in ASA 200,[\\[6\\]](#_ftn7) the matter of difficulty, time, or cost involved is not in itself a valid basis for the auditor to omit an audit procedure for which there is no alternative or to be satisfied with audit evidence that is less than persuasive.\n2.  In some cases where attendance is impracticable, alternative audit procedures, for example inspection of documentation of the subsequent sale of specific inventory items acquired or purchased prior to the physical inventory counting, may provide sufficient appropriate audit evidence about the existence and condition of inventory.\n3.  In other cases, however, it may not be possible to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by performing alternative audit procedures. In such cases, ASA 705 requires the auditor to modify the opinion in the auditor’s report as a result of the scope limitation.[\\[7\\]](#_ftn8)\n\nInventory under the Custody and Control of a Third Party\n\nConfirmation (Ref: Para. 8(a))\n\n1.  ASA 505[\\[8\\]](#_ftn9) establishes requirements and provides guidance for performing external confirmation procedures.\n\nOther Audit Procedures (Ref: Para. 8(b))\n\n1.  Depending on the circumstances, for example where information is obtained that raises doubt about the integrity and objectivity of the third party, the auditor may consider it appropriate to perform other audit procedures instead of, or in addition to, confirmation with the third party. Examples of other audit procedures include:\n\n-   Attending, or arranging for another auditor to attend, the third party’s physical counting of inventory, if practicable.\n-   Obtaining another auditor’s report, or a service auditor’s report, on the adequacy of the third party’s internal control for ensuring that inventory is properly counted and adequately safeguarded.\n-   Inspecting documentation regarding inventory held by third parties, for example, warehouse receipts.\n-   Requesting confirmation from other parties when inventory has been pledged as collateral.\n\n###### Litigation and Claims\n\nA17.-A25. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information (Ref: Para. 13)\n\nA26. Depending on the applicable financial reporting framework, the entity may be required or permitted to disclose segment information in the financial report. The auditor’s responsibility regarding the presentation and disclosure of segment information is in relation to the financial report taken as a whole. Accordingly, the auditor is not required to perform audit procedures that would be necessary to express an opinion on the segment information presented on a  \nstand-alone basis.\n\nUnderstanding of the Methods Used by Management (Ref: Para. 13(a))\n\nA27. Depending on the circumstances, example of matters that may be relevant when obtaining an understanding of the methods used by management in determining segment information and whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework include:\n\n-   Sales, transfers and charges between segments, and elimination of inter-segment amounts.\n-   Comparisons with budgets and other expected results, for example, operating profits as a percentage of sales.\n-   The allocation of assets and costs among segments.\n-   Consistency with prior periods, and the adequacy of the disclosures with respect to inconsistencies.","sortOrder":18},{"sectionNumber":"Inventory","sectionType":"section","heading":"Inventory","content":"###### Inventory\n\n1.  If inventory is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by:\n    1.  Attendance at physical inventory counting, unless impracticable, to: (Ref: Para. A1-A3)\n        1.  Evaluate management’s instructions and procedures for recording and controlling the results of the entity’s physical inventory counting;  \n            (Ref: Para. A4)\n        2.  Observe the performance of management’s count procedures; (Ref: Para. A5)\n        3.  Inspect the inventory; and (Ref: Para. A6)\n        4.  Perform test counts; and (Ref: Para. A7-A8)\n    2.  Performing audit procedures over the entity’s final inventory records to determine whether they accurately reflect actual inventory count results.\n2.  If physical inventory counting is conducted at a date other than the date of the financial report, the auditor shall, in addition to the procedures required by paragraph 4 of this Auditing Standard, perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial report are properly recorded. (Ref: Para. A9-A11)\n3.  If the auditor is unable to attend physical inventory counting due to unforeseen circumstances, the auditor shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions.\n4.  If attendance at physical inventory counting is impracticable, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory. If it is not possible to do so, the auditor shall modify the opinion in the auditor’s report in accordance with ASA 705.[\\[3\\]](#_ftn4)  \n    (Ref: Para. A12-A14)\n5.  If inventory under the custody and control of a third party is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by performing one or both of the following:\n    1.  Request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity. (Ref: Para. A15)\n    2.  Perform inspection or other audit procedures appropriate in the circumstances. (Ref: Para. A16)","sortOrder":19},{"sectionNumber":"Litigation and Claims","sectionType":"section","heading":"Litigation and Claims","content":"###### Litigation and Claims\n\n9.-12. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]","sortOrder":20},{"sectionNumber":"Segment Information","sectionType":"section","heading":"Segment Information","content":"###### Segment Information\n\n13. The auditor shall obtain sufficient appropriate audit evidence regarding the presentation and disclosure of segment information in accordance with the applicable financial reporting framework by: (Ref: Para. A26)\n\n1.  Obtaining an understanding of the methods used by management in determining segment information, and:  \n    (Ref: Para. A27)\n    1.  Evaluating whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework; and\n    2.  Where appropriate, testing the application of such methods; and\n\n1.  Performing analytical procedures or other audit procedures appropriate in the circumstances.\n\n\\* \\* \\*","sortOrder":21},{"sectionNumber":"Application and Other Explanatory Materi","sectionType":"section","heading":"Application and Other Explanatory Material","content":"Auditing Standard ASA 501\n\nThe Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 501 Audit Evidence—Specific Considerations for Inventory and Segment Information pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 27 October 2009.\n\nThis compiled version of ASA 501 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 27 April 2022 (see Compilation Details).\n\n## Auditing Standard ASA 501\n\n### Audit Evidence—Specific Considerations for Inventory and Segment Information\n\n##### Application\n\nAus 0.1 This Auditing Standard applies to:\n\n(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with the Corporations Act 2001; and\n\n(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.\n\nAus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.\n\n##### Operative Date\n\nAus 0.3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 January 2010. \\[Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilation Details.\\]\n\n##### Introduction\n\n###### Scope of this Auditing Standard\n\n1.  This Auditing Standard deals with specific considerations by the auditor in obtaining sufficient appropriate audit evidence in accordance with ASA 330,1F[\\[1\\]](#_ftn2) ASA 5002F[\\[2\\]](#_ftn3) and other relevant Australian Auditing Standards, with respect to certain aspects of inventory and segment information in an audit of a financial report.\n\n###### Effective Date\n\n1.  \\[Deleted by the AUASB. Refer Aus 0.3\\]\n\n##### Objective\n\n1.  The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the:\n    1.  Existence and condition of inventory; and\n    2.  \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n    3.  Presentation and disclosure of segment information in accordance with the applicable financial reporting framework.\n\n##### Requirements\n\n###### Inventory\n\n1.  If inventory is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by:\n    1.  Attendance at physical inventory counting, unless impracticable, to: (Ref: Para. A1-A3)\n        1.  Evaluate management’s instructions and procedures for recording and controlling the results of the entity’s physical inventory counting;  \n            (Ref: Para. A4)\n        2.  Observe the performance of management’s count procedures; (Ref: Para. A5)\n        3.  Inspect the inventory; and (Ref: Para. A6)\n        4.  Perform test counts; and (Ref: Para. A7-A8)\n    2.  Performing audit procedures over the entity’s final inventory records to determine whether they accurately reflect actual inventory count results.\n2.  If physical inventory counting is conducted at a date other than the date of the financial report, the auditor shall, in addition to the procedures required by paragraph 4 of this Auditing Standard, perform audit procedures to obtain audit evidence about whether changes in inventory between the count date and the date of the financial report are properly recorded. (Ref: Para. A9-A11)\n3.  If the auditor is unable to attend physical inventory counting due to unforeseen circumstances, the auditor shall make or observe some physical counts on an alternative date, and perform audit procedures on intervening transactions.\n4.  If attendance at physical inventory counting is impracticable, the auditor shall perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory. If it is not possible to do so, the auditor shall modify the opinion in the auditor’s report in accordance with ASA 705.[\\[3\\]](#_ftn4)  \n    (Ref: Para. A12-A14)\n5.  If inventory under the custody and control of a third party is material to the financial report, the auditor shall obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by performing one or both of the following:\n    1.  Request confirmation from the third party as to the quantities and condition of inventory held on behalf of the entity. (Ref: Para. A15)\n    2.  Perform inspection or other audit procedures appropriate in the circumstances. (Ref: Para. A16)\n\n###### Litigation and Claims\n\n9.-12. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information\n\n13. The auditor shall obtain sufficient appropriate audit evidence regarding the presentation and disclosure of segment information in accordance with the applicable financial reporting framework by: (Ref: Para. A26)\n\n1.  Obtaining an understanding of the methods used by management in determining segment information, and:  \n    (Ref: Para. A27)\n    1.  Evaluating whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework; and\n    2.  Where appropriate, testing the application of such methods; and\n\n1.  Performing analytical procedures or other audit procedures appropriate in the circumstances.\n\n\\* \\* \\*\n\n##### Application and Other Explanatory Material\n\n###### Inventory\n\nAttendance at Physical Inventory Counting (Ref: Para. 4(a))\n\n1.  Management ordinarily establishes procedures under which inventory is physically counted at least once a year to serve as a basis for the preparation of the financial report and, if applicable, to ascertain the reliability of the entity’s perpetual inventory system.\n2.  Attendance at physical inventory counting involves:\n\n-   Inspecting the inventory to ascertain its existence and evaluate its condition, and performing test counts;\n-   Observing compliance with management’s instructions and the performance of procedures for recording and controlling the results of the physical inventory count; and\n-   Obtaining audit evidence as to the reliability of management’s count procedures.\n\nThese procedures may serve as test of controls or substantive procedures depending on the auditor’s risk assessment, planned approach and the specific procedures carried out.\n\n1.  Matters relevant in planning attendance at physical inventory counting (or in designing and performing audit procedures pursuant to paragraphs 4-8 of this Auditing Standard) include, for example:\n\n-   The risks of material misstatement related to inventory.\n-   The nature of the internal control related to inventory.\n-   Whether adequate procedures are expected to be established and proper instructions issued for physical inventory counting.\n-   The timing of physical inventory counting.\n-   Whether the entity maintains a perpetual inventory system.\n-   The locations at which inventory is held, including the materiality of the inventory and the risks of material misstatement at different locations, in deciding at which locations attendance is appropriate.\n-   Whether the assistance of an auditor’s expert is needed. ASA 620[\\[4\\]](#_ftn5) deals with the use of an auditor’s expert to assist the auditor to obtain sufficient appropriate audit evidence.\n\nEvaluate Management’s Instructions and Procedures (Ref: Para. 4(a)(i))\n\n1.  Matters relevant in evaluating management’s instructions and procedures for recording and controlling the physical inventory counting include whether they address, for example:\n\n-   The application of appropriate controls, for example, collection of used physical inventory count records, accounting for unused physical inventory count records, and count and re-count procedures.\n-   The accurate identification of the stage of completion of work in progress, of slow moving, obsolete or damaged items and of inventory owned by a third party, for example, on consignment.\n-   The procedures used to estimate physical quantities, where applicable, such as may be needed in estimating the physical quantity of a coal pile.\n-   Control over the movement of inventory between areas and the shipping and receipt of inventory before and after the cut-off date.\n\nObserve the Performance of Management’s Count Procedures  \n(Ref: Para. 4(a)(ii))\n\n1.  Observing the performance of management’s count procedures, for example those relating to control over the movement of inventory before, during and after the count, assists the auditor in obtaining audit evidence that management’s instructions and count procedures are adequately designed and implemented. In addition, the auditor may obtain copies of cut-off information, such as details of the movement of inventory, to assist the auditor in performing audit procedures over the accounting for such movements at a later date.\n\nInspect the Inventory (Ref: Para. 4(a)(iii))\n\n1.  Inspecting inventory when attending physical inventory counting assists the auditor in ascertaining the existence of the inventory (though not necessarily its ownership), and in identifying, for example, obsolete, damaged or ageing inventory.\n\nPerform Test Counts (Ref: Para. 4(a)(iv))\n\n1.  Performing test counts, for example by tracing items selected from management’s count records to the physical inventory and tracing items selected from the physical inventory to management’s count records, provides audit evidence about the completeness and the accuracy of those records.\n2.  In addition to recording the auditor’s test counts, obtaining copies of management’s completed physical inventory count records assists the auditor in performing subsequent audit procedures to determine whether the entity’s final inventory records accurately reflect actual inventory count results.\n\nPhysical Inventory Counting Conducted Other than At the Date of the Financial Report (Ref: Para. 5)\n\n1.  For practical reasons, the physical inventory counting may be conducted at a date, or dates, other than the date of the financial report. This may be done irrespective of whether management determines inventory quantities by an annual physical inventory counting or maintains a perpetual inventory system. In either case, the effectiveness of the design, implementation and maintenance of controls over changes in inventory determines whether the conduct of physical inventory counting at a date, or dates, other than the date of the financial report is appropriate for audit purposes. ASA 330 establishes requirements and provides guidance on substantive procedures performed at an interim date.[\\[5\\]](#_ftn6)\n2.  Where a perpetual inventory system is maintained, management may perform physical counts or other tests to ascertain the reliability of inventory quantity information included in the entity’s perpetual inventory records. In some cases, management or the auditor may identify differences between the perpetual inventory records and actual physical inventory quantities on hand; this may indicate that the controls over changes in inventory are not operating effectively.\n3.  Relevant matters for consideration when designing audit procedures to obtain audit evidence about whether changes in inventory amounts between the count date, or dates, and the final inventory records are properly recorded include:\n\n-   Whether the perpetual inventory records are properly adjusted.\n-   Reliability of the entity’s perpetual inventory records.\n-   Reasons for significant differences between the information obtained during the physical count and the perpetual inventory records.\n\nAttendance at Physical Inventory Counting Is Impracticable (Ref: Para. 7)\n\n1.  In some cases, attendance at physical inventory counting may be impracticable. This may be due to factors such as the nature and location of the inventory, for example, where inventory is held in a location that may pose threats to the safety of the auditor. The matter of general inconvenience to the auditor, however, is not sufficient to support a decision by the auditor that attendance is impracticable. Further, as explained in ASA 200,[\\[6\\]](#_ftn7) the matter of difficulty, time, or cost involved is not in itself a valid basis for the auditor to omit an audit procedure for which there is no alternative or to be satisfied with audit evidence that is less than persuasive.\n2.  In some cases where attendance is impracticable, alternative audit procedures, for example inspection of documentation of the subsequent sale of specific inventory items acquired or purchased prior to the physical inventory counting, may provide sufficient appropriate audit evidence about the existence and condition of inventory.\n3.  In other cases, however, it may not be possible to obtain sufficient appropriate audit evidence regarding the existence and condition of inventory by performing alternative audit procedures. In such cases, ASA 705 requires the auditor to modify the opinion in the auditor’s report as a result of the scope limitation.[\\[7\\]](#_ftn8)\n\nInventory under the Custody and Control of a Third Party\n\nConfirmation (Ref: Para. 8(a))\n\n1.  ASA 505[\\[8\\]](#_ftn9) establishes requirements and provides guidance for performing external confirmation procedures.\n\nOther Audit Procedures (Ref: Para. 8(b))\n\n1.  Depending on the circumstances, for example where information is obtained that raises doubt about the integrity and objectivity of the third party, the auditor may consider it appropriate to perform other audit procedures instead of, or in addition to, confirmation with the third party. Examples of other audit procedures include:\n\n-   Attending, or arranging for another auditor to attend, the third party’s physical counting of inventory, if practicable.\n-   Obtaining another auditor’s report, or a service auditor’s report, on the adequacy of the third party’s internal control for ensuring that inventory is properly counted and adequately safeguarded.\n-   Inspecting documentation regarding inventory held by third parties, for example, warehouse receipts.\n-   Requesting confirmation from other parties when inventory has been pledged as collateral.\n\n###### Litigation and Claims\n\nA17.-A25. \\[Deleted by the AUASB. Refer ASA 502 Audit Evidence—Specific Considerations for Litigation and Claims\\]\n\n###### Segment Information (Ref: Para. 13)\n\nA26. Depending on the applicable financial reporting framework, the entity may be required or permitted to disclose segment information in the financial report. The auditor’s responsibility regarding the presentation and disclosure of segment information is in relation to the financial report taken as a whole. Accordingly, the auditor is not required to perform audit procedures that would be necessary to express an opinion on the segment information presented on a  \nstand-alone basis.\n\nUnderstanding of the Methods Used by Management (Ref: Para. 13(a))\n\nA27. Depending on the circumstances, example of matters that may be relevant when obtaining an understanding of the methods used by management in determining segment information and whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework include:\n\n-   Sales, transfers and charges between segments, and elimination of inter-segment amounts.\n-   Comparisons with budgets and other expected results, for example, operating profits as a percentage of sales.\n-   The allocation of assets and costs among segments.\n-   Consistency with prior periods, and the adequacy of the disclosures with respect to inconsistencies.","sortOrder":22},{"sectionNumber":"Segment Information (Ref: Para. 13)","sectionType":"section","heading":"Segment Information (Ref: Para. 13)","content":"###### Segment Information (Ref: Para. 13)\n\nA26. Depending on the applicable financial reporting framework, the entity may be required or permitted to disclose segment information in the financial report. The auditor’s responsibility regarding the presentation and disclosure of segment information is in relation to the financial report taken as a whole. Accordingly, the auditor is not required to perform audit procedures that would be necessary to express an opinion on the segment information presented on a  \nstand-alone basis.\n\nUnderstanding of the Methods Used by Management (Ref: Para. 13(a))\n\nA27. Depending on the circumstances, example of matters that may be relevant when obtaining an understanding of the methods used by management in determining segment information and whether such methods are likely to result in disclosure in accordance with the applicable financial reporting framework include:\n\n-   Sales, transfers and charges between segments, and elimination of inter-segment amounts.\n-   Comparisons with budgets and other expected results, for example, operating profits as a percentage of sales.\n-   The allocation of assets and costs among segments.\n-   Consistency with prior periods, and the adequacy of the disclosures with respect to inconsistencies.","sortOrder":25}],"analysis":{"kimi_summary":{"_metrics":{"completionTokens":711},"content_quality":"ok","complexity_score":5,"scope_assessment":{"changed":true,"description":"The scope was deliberately narrowed from its original intent. The standard originally covered inventory, litigation/claims, and segment information. However, the AUASB decided to split out litigation and claims into a separate standard (ASA 502), retaining ASA 501 for inventory and segment information only. This was done to maintain continuity with previous Australian practice (ASA 508) and because the AUASB considered the litigation and claims guidance important enough to warrant standalone treatment. The result is a standard that now covers only two of the three topics in the equivalent international standard (ISA 501)."},"complexity_factors":["Multiple cross-references to other auditing standards (ASA 330, ASA 500, ASA 505, ASA 620, ASA 705)","Conditional requirements with nested exceptions (e.g., attendance 'unless impracticable', alternative procedures 'if not possible')","Deleted provisions retained as placeholders with redirection to ASA 502","Compilation structure showing amendment history across four separate standards over 13 years","Australian-specific ('Aus') paragraphs layered over international standard base","Footnote references to undefined external standards in the provided text"],"plain_english_summary":"This is an **Australian Auditing Standard** that sets out specific rules for how auditors must gather evidence about two particular areas: **inventory** (stock) and **segment information** (how a company breaks down its business into different parts).\n\n**Who it affects:**\n- **Auditors** conducting audits of company financial reports under the Corporations Act 2001\n- **Companies** that hold material amounts of inventory or that report segment information\n\n**What it requires:**\n\n**For Inventory:**\n- Auditors must **physically attend** stocktakes (inventory counts) unless it's genuinely impracticable — and inconvenience alone doesn't count\n- When attending, they must:\n  - **Evaluate** management's counting procedures\n  - **Observe** how the count is done\n  - **Inspect** the inventory itself (checking condition, identifying obsolete or damaged goods)\n  - **Perform test counts** to check accuracy\n- If the count happens on a different date to the financial report, auditors must check that changes in between are properly recorded\n- If they can't attend, they must do alternative counts on another date, or use other procedures — and if that's not possible, they must **modify their audit opinion** (essentially flag a problem)\n- For inventory held by **third parties** (like in a warehouse), auditors must get confirmation or perform other checks\n\n**For Segment Information:**\n- Auditors must understand how management determines segment information\n- They must **evaluate** whether the methods comply with the relevant accounting standards\n- They must **test** those methods where appropriate\n- They must perform **analytical procedures** (comparisons, trend analysis, etc.)\n\n**Why it matters:**\nInventory is often a major asset on company balance sheets and is susceptible to errors, fraud, and valuation problems. Segment information helps investors understand how different parts of a business are performing. This standard ensures auditors do proper detective work on both, giving confidence that financial reports are reliable.\n\n**Note on structure:** This standard originally included litigation and claims, but those provisions were **moved to a separate standard (ASA 502)** — you'll see \"Deleted\" references throughout the text."},"flash_summary_failed":{"failed":true,"reason":"A positive credit balance is required for all requests, including BYOK, so fallback providers remain available. Add credits at https://vercel.com/d?to=%2F%5Bteam%5D%2F%7E%2Fai%3Fmodal%3Dtop-up to continue.","source":"analysis-cron"}},"importantCases":[],"_links":{"self":"/api/acts/asa-501-audit-evidence-specific-considerations-for-inventory-and-segment-information-october-2009","history":"/api/acts/asa-501-audit-evidence-specific-considerations-for-inventory-and-segment-information-october-2009/history","analysis":"/api/acts/asa-501-audit-evidence-specific-considerations-for-inventory-and-segment-information-october-2009/analysis","conflicts":"/api/acts/asa-501-audit-evidence-specific-considerations-for-inventory-and-segment-information-october-2009/conflicts","importantCases":"/api/acts/asa-501-audit-evidence-specific-considerations-for-inventory-and-segment-information-october-2009/important-cases","documents":"/api/acts/asa-501-audit-evidence-specific-considerations-for-inventory-and-segment-information-october-2009/documents"}}