Wastage of inventories, pilferage, dormant or obsolete stock can be huge drawback for developing as well as developed businesses. Stock Audit can act as a safeguard against such mess. A Stock Audit is process of verifying the inventory recorded in the books with the actual inventory in the warehouse. In Manufacturing and trading entities, the inventory constitutes a significant portion of the total asset. Therefore, audit of the inventory in such industry has got particular importance. Stock Audit is carried out for tracking the inventory of the organization and whether proper utilization of the inventory is being done by the organization by verifying the opening and closing stock of the organization.
Every business organization need to perform Stock Audit at least once in a year. It helps organization to verify the correctness of inventory records, detect fraudulent activity, reduction in value of stock, losses or wastage of stock. Stock audit also increase the understanding of flow of stock in an organization.
Benefits of Stock Audit:
Stock Audit Procedures: –
List of Documents Required for Stock Audit:-
- Latest Audited Financial Statements
- Stock Register
- Stock List of Non-moving, obsolete, dead stock, etc.
- Method of Valuation of Closing Stock
Stock Audit is one of the important activity of the organisation, as it will help organisation in smooth functioning and increases the profitability of business. It is a statutory process that every organisation has to perform in order to avoid any discrepancies in stock, therefore stock audit must be performed by organisation at least once in a year.
(This article represents the views of the authors only and does not intent to give any kind of legal opinion on any matter)
CA Hardik Patel
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