Stock & Inventory Audit

What is Stock & Inventory Audit?

Stock & Inventory Audit is a critical corporate requirement in India. At Atlaz, we ensure your business remains 100% compliant with government regulations. Engaging a professional service for your Stock & Inventory Audit mitigates legal risks, optimizes operational efficiency, and establishes a foundation of trust with stakeholders and regulatory bodies.

Aspect With Professional Support Without Support
Compliance Speed Accelerated Prone to delays
Legal Risk Mitigated High
Cost Efficiency Optimized Hidden Penalties

Prevent inventory shrinkage and safeguard bank financing with our meticulous physical and systemic stock audit services.

Thorough Guide to Stock & Inventory Audit

A Stock Audit (or Inventory Audit) is a physical verification of the inventory owned by a business, ensuring that the physical stock perfectly matches the records maintained in the accounting systems. For manufacturing, retail, and trading businesses, inventory is often the largest current asset, making its accurate valuation and security critical.

Stock audits are frequently mandated by banks and financial institutions for companies that have availed Cash Credit (CC) or Overdraft (OD) facilities against hypothecation of stock. Banks require independent verification to ensure their collateral is safe, adequately insured, and properly valued.

Our audit team conducts rigorous physical verifications across warehouses and retail outlets. We identify slow-moving, obsolete, or damaged stock (SLOB), uncover theft or pilferage, and review the standard operating procedures (SOPs) for inventory management to improve your operational efficiency.

Information Required

  • Stock Register and ERP Inventory Reports
  • Invoices for major purchases and sales during the period
  • Warehouse/Godown layout and location details
  • Insurance policies covering the inventory
  • Bank sanction letters detailing hypothecation terms
  • Details of goods sent on approval or job work

Engagement Process

1

Pre-audit planning and mapping of warehouse locations

2

Surprise/Scheduled physical verification of stock items (ABC Analysis)

3

Reconciliation of physical counts with ERP/Book records

4

Valuation check (FIFO/Weighted Average) and provision for obsolete stock

5

Verification of insurance coverage and hypothecation boards

6

Submission of the detailed Stock Audit Report to management/bank

Service Timeline

3 - 7 Working Days

Value Delivered

Identify Pilferage

Detect theft, shrinkage, and unauthorized stock movements immediately.

Bank Compliance

Satisfy strict lender requirements to maintain continuous CC/OD limits.

Accurate Valuation

Ensure profit margins are accurately reflected by properly valuing closing stock.

SLOB Identification

Identify Slow-moving, Obsolete, and Damaged stock to optimize working capital.

Engage Our Audit Team

Frequently Asked Questions

Why do banks insist on a stock audit?
Banks provide working capital loans against the security of stock and debtors. They need an independent stock audit to verify that the value of the stock physically present covers the loan outstanding, ensuring their money is safe.
How often should a stock audit be conducted?
Banks typically mandate it annually or half-yearly. However, retail and FMCG businesses should conduct internal cyclical or perpetual stock counts monthly or quarterly to prevent theft.
What is ABC analysis in stock auditing?
ABC analysis categorizes inventory based on value. 'A' items are high-value (100% verification), 'B' items are moderate value (sample verification), and 'C' items are low-value bulk items (test checks).
How are discrepancies handled?
If physical stock is less than book stock, the shortage must be investigated for theft/spoilage and written off in the P&L. If physical stock is more, it indicates unrecorded purchases or returns.
Does the auditor check the valuation of the stock?
Yes, verifying physical existence is only half the job. The auditor must also verify that the stock is valued correctly according to Accounting Standard 2 (Lower of Cost or Net Realizable Value).
What happens if obsolete stock is found?
The auditor will report the value of non-moving, obsolete, or damaged (SLOB) stock. Management must make a financial provision for this loss to present a true and fair view of assets.