What are Stock Audits?
Stock audits check to ensure that financial records match a company’s stock records and that those records align with a physical stock count. As part of that physical count, employees go through every item in the warehouse, typically with the assistance of technology that adds up and records products on hand. Audits add another piece to this, bringing in a third party to confirm not only the quantity of stock but also its quality and condition — and identify any instances of theft, damage, or misplacement.
Why are Stock Audits Required?
Stocks are the most valuable asset for any business and also highly susceptible to pilferage, damage, expiry, and wastage. The objective of a Stock Audit is to ensure the existence, accuracy, ownership rights and also verify the realizable value of the items in the company’s inventory. Accurate accounting of stock is also essential to a robust bookkeeping system and MIS reporting. Since the stock has a lot of movement during business days, the process of routine physical verification needs proper planning, resource mobilization and expertise.
Our team of experts can assist you in stock verification and provide more insights into your stock, along with a proper reconciliation of the existing stock records. Through our stock verification and valuation services, we identify the excess/shortage of materials in stock and identify the old/damaged materials in inventory. It helps the management to reduce wastage and losses arising due to damage or obsolescence stock.
Which Companies are required to do Stock Audit?
The Companies (Auditor’s Report) Order, 2016 (CARO 2016) also requires auditors to comment on “Whether physical verification of stock has been conducted at reasonable intervals by the management and whether any material discrepancies were noticed and if so, whether they have been properly dealt with in the books of account”. Companies into manufacturing of any type of stock must get their stock periodically verified. Also, Companies having multiple distributors and retail outlets, must ascertain checks at all levels to know discrepancies if any.