Stock Audit involves the physical verification of inventories, reconciliation with books of account and assessment of valuation methods. It helps establish the existence, ownership, condition and correct valuation of stock held by an entity.
Scope of Stock Audit
The engagement covers:
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Physical counting and verification of inventory
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Reconciliation of physical stock with book records
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Review of stock valuation methods and cut-off procedures
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Assessment of inventory management systems and storage conditions
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Identification of slow-moving, obsolete or damaged stock
Process
A systematic procedure is adopted:
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Planning and coordination of physical verification
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Observation of stock-taking procedures
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Test counts and independent verification
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Analysis of discrepancies and root causes
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Reporting of findings and recommended adjustments
Outcomes
Accurate stock records support reliable financial reporting, inventory control and informed decision-making on procurement and working capital.