Stock audit, commonly known as inventory audit, is generally conducted every 6 months or annually depending on company policy. Stock audit is a detailed process of cross verifying the quantity, quality, and condition of the physical inventory. The timely process confirms the inventory recorded in the company’s accounting records matches the actual inventory in warehouse.
- Audits can be carried out either by 2 methods:
Conducted regularly every 6 months, to report any damaged goods, discrepancies. Identifying between fast moving goods and slow moving in order to maintain Minimum Stock Quantity
Conducted once at year end, to report the final quantity of stock in hand and total value of stock which will be reflected in annual audited reports, giving the confidence to Shareholders and key stakeholders about the accuracy of Stock report.
- Objectives
Optimize Your Stock, Maximize Your Returns
Maintaining accurate financial records
Where in identifying discrepancies resulting in presenting a truthful and fair picture of the company’s inventory status.
Cross checking the ownership rights
Whether the company genuinely owns the inventory it has documented.Reporting damaged/ obsolete inventory and ensuring the inventory is valued at net realizable value.
Cross comparing the stock value and quantity
Ensuring the values match as per stock ledger . Preventing theft, omission of quantity thus verifying stock quantity. Ensuring the company complies with legal and regulatory requirements.
Preparation of Stock Audit
Gather stock records from accounting systems, prior year audit report and Day books (i.e. Purchase, Sales, Sales Returns, Shipping ledgers).
Plan the timeline for conducting the audit, whether in presence of supervisor or auditor
Assign team members to different inventory departments
Categorize inventory based on Monetary value or Inventory type (Raw Materials, Finished Goods).
Plan how to count inventory (i.e. manually or with help of barcode reader
Reconcile the inventory with records, Mention if any discrepancies identify, accordingly investigate.
Check the quality of the product, look for expiry or damaged goods.On the completion of Inventory count, perform the following
Prepare a detailed report on the inventory counted, discrepancies identified, damaged goods found
Provide possible recommendations for future audits
Record for any changes adjustments in policies advised by auditors
Seeking Professional Advice
Don’t let inventory inaccuracies hinder your business’s profitability and efficiency. Schedule a stock audit today to optimize your inventory management and ensure accurate financial reporting.
