Stock Audit Procedure in India

Stock Audit!! Does this sound common to Inventory Audit?

Yes, it is. A stock audit, also known as an inventory audit, is a physical examination of a company's or institution's inventory holdings. There are numerous types of stock audits based on the aim, and each one requires a unique technique.

By law, every corporate entity must undertake a stock audit at least once every financial year. The stock audit method comprises counting physical stock on certain locations and comparing it to compute stock held by the company. The reason for performing stock audit procedure is to reconcile disparities between book and physical stock by submitting relevant adjustment entries.

What is the significance of a stock audit?

There are many compelling reasons for a corporation to conduct a stock audit, including:

• Slow-moving stock, obsolete stock, dead-stock, and scrap i.e. stock verification should be done.

• Check to see if there are any discrepancies between book stocks and real stock.

• To reflect the stock in the books, update the physical stock.

• Ascertain that stocks are stored and handled properly.

Let’s glance at some of the main advantages of stock audits:

• To avoid thievery and fraud
• To boost the bottom line by reducing costs
• As a good control mechanism for company operations
• To close gaps in the inventory management process, as reliable inventory value information is available.
• As part of one-of-a-kind agreements for third-party opinions, such as in the case of agent warehouses

Stock Audit Procedure

In India, following steps are taken care of while performing stock audit.

Cut-off Analysis – The stock auditors will examine your procedures for stopping any additional receipt into the warehouse or shipments during the physical inventory count in order to eliminate any unnecessary inventory items. They usually examine the last few receiving and shipping transactions prior to the physical count, as well as the transactions immediately afterward, to see if you have a good accounting record for them.

Keep an eye on the physical inventory count - The process of physically counting and accounting for all inventory assets is known as physical inventory counting. An auditor frequently employs technology such as a bar code scanner to physically count each item.

Adjust the inventory count in the general ledger - If an organization utilizes FIFO (first-in, first-out) or LIFO (last-in, first-out) inventory, Inventory Layers is a way for ensuring that the inventory recorded is correct.

High-value Item Inventory Analysis – If there is especially high-value inventory, the auditors will likely spend extra time counting it in Inventory to ensure that it is appropriately priced. They'll also follow the trail of their valuation report, which is reflected in the inventory balance in the general ledger.

Items that are prone to errors should be tested - The auditors will re-test specific inventory items for which they identified an erroneous tendency in past years.

In-transit inventory testing - If any merchandise is in transit from one storage site to another while the physical count is being performed, there is a danger. Stock Auditors will put this to the test as part of their evaluation of your transfer documents. If you are looking for internal audit jobs, then you can go on Qwirk portal.

Analyze freight costs - Freight Cost Analysis is a method for calculating shipping costs as well as the price of transferring products from one location to another.

Finished-goods costs analysis - Finished products are inventory that has been completed and is ready to sell, according to cost analysis. An auditor then assesses the inventory's value for the current accounting period.

Reconciling items investigation - Reconciling items research is utilized when inconsistencies between inventory counts and actual numbers in warehouses are detected. The stock auditor looks for any discrepancies in the records and makes the required changes.

Concluding Lines….

A stock audit's goal is to guarantee that the laws and regulations are followed in order to keep an accurate financial report on the company's inventory management.

Looking for some stock auditors to help you with your stock audit procedure?

QWIRK is your solution.

QWIRK is a professional marketplace that helps businesses find vetted skilled people in India for short-term employment and projects. Finance, audit, tax, and accounting were the first focus areas for the organization.

Please contact us if you require any other information.