Stock Audit
Assurance over information in Financial Statements help to navigate complexity & brings transparent information to investors & stakeholders.
Management
of Inventory
Risk
Stock audit, in general usage is considered as an important auditing term which refers to the physical verification of the inventory. However at times, it may also involve the valuation of the inventory but it would depend on the terms of reference or the engagement letter of the assignment. It is the process of examining financial records with physical inventory and other records.
In other words, a stock audit is a statutory process that every business institution needs to perform at least once in a financial year. As far as the stock audit process is concerned, the process mainly involves the counting of physical stock presenting the specified premises and verifying the same with computed stock maintained by the company. The reason and purpose behind executing this are to correct the discrepancies present in the book stock when compared to physical stock bypassing necessary adjustment entries.
Stock Audit or Inventory Audit Services in India require a team of qualified professionals. Stocks, Inventory and physical assets such as raw materials are important real assets and need regular watch & monitoring.
As a large number of companies are operating across the borders through multiple locations, having multiple branches, outlets, warehouses, some even with various channel partners, ensuring this watch and repeated monitoring is challenge.
Importance of Stock Audit
Observation of inventory is a generally accepted auditing procedure, where an independent auditor issues an opinion on whether the financial records of inventory accurately represent the actual inventory being carried.
Auditing inventory is an important aspect of gathering evidence, especially for manufacturing or retail-based businesses. It can represent a large balance of assets or capital.
Auditing inventory must verify not only the amount of inventory but also its quality and condition to see whether the value of the inventory is fairly represented in financial records and statements.
- ABC Analysis – Grouping different value and volume inventory.
- Analytical Procedures - Analyzing inventory based on financial metrics such as gross margins, days inventory on hand, inventory turnover ratio, and costs of inventory historically.
- Cut-off Analysis - Pausing operations such as receiving and shipping of inventory while making a physical count to avoid mistakes.
- Finished Goods Cost Analysis - Applies to manufacturers and includes valuing finished inventory during an accounting period.
- Freight Cost Analysis - Determining the shipping or freight costs for transporting inventory to different locations.
- Overhead Analysis - Analyzing the indirect costs of the business and overhead costs that may be included in the costs of inventory. Rent, utilities, and other costs can be recorded as part of inventory costs in some cases.
- Matching – Matching number of items & cost of inventory shipped with financial records.
- Reconciliation – Solving discrepancies found in stock audit.
- To update the opening stock details.
- To identify the discrepancy between book stocks also known as computed stock and physical stock.
- To update the actual physical stock as book stock.
- To ensure proper preservation and handling of stocks.
Lex Koterie LLP, offer reliable stock audit services to companies and organizations with a dedication and aim to help them safeguard and monitor their physical assets and inventories. Our dedicated team of professionals are focused on Stock Audit services to companies to keep them assured of their inventories & physical assets.
- Direct impact on costs and bottom line.
- Prevent pilferage and fraud.
- Identifies slow moving stock, obsolete stock, dead stock and scrap.
- Third party independent opinion, especially for agent warehouses.
- Identifies gap in current inventory management process.
- Enable accurate valuation of inventory.
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