Stock Audits

Inventories are a form of tangible property that is held for sale in the ordinary course of business. Stocks generally constitute a significant portion of the total assets, especially in case of manufacturing and trading entities as well as some service rendering organizations. Audit of inventories hence has got particular importance.

Stock Audit is the physical verification of Inventory. However, sometimes it may also include the valuation of the Inventory, this depends on the terms of reference or the engagement letter of the assignment. Every business organization at least must perform stock audit once a year, to ensure and update that the physical stock and the computed stock match.

Frequently Asked Questions

What is a Stock Audit Report ?

A stock audit report is used to document the details or information about the existing stocks of the business that has been gathered during a stock audit. Annual stock audit reports provide important details that are used by companies in their financial statements.

Why is a Stock Audit important ?

There are several key reasons why an institution needs to perform a stock audit, including:

• Identify the slow-moving stock, deadstock, obsolete stock, and scrap
• Find out discrepancies between book stocks and physical stock
• Update the physical stock that matches book stock
• Make sure the proper preservation and handling of stocks

What is the Stock Audit benefits ?

Stock audits is also an important factor in determining the benefits that should be offered to institutions. These are the key benefits of stock audits:

• To reduce cost and bottom-line
• To prevent pilferage and fraud
• As information of the accurate inventory value
• to reduce gaps in the inventory management process
• As special arrangements for third party opinion, including for agent warehouses
• As a good control mechanism in running the business