.webp){kind=small}
.webp){kind=small}
.webp){kind=small}
The auditing process, as defined by the Companies Act 2013, is a structured procedure that examines a company's financial statements to ensure they present a true and fair view of the company's affairs. Similarly, a stock audit involves the physical verification of inventory, evaluating items based on reference assignments.
A stock audit is crucial for minimizing unnecessary investments in inventory, ensuring a balanced process. High inventory levels can lead to overstocking, resulting in poor cash flow and potential financial losses.
The auditor's role includes examining these statements and identifying any discrepancies or potential fraud. The auditor must report any findings in their audit report, as they cannot assume the company's management might have committed fraud without evidence.
The primary purpose of conducting a stock audit is to identify and correct discrepancies between stock records and physical inventory through necessary adjustments.
Here are key reasons for performing a stock audit
Updating the Starting Stock Details: Ensuring accurate records from the beginning.
Identifying Discrepancies: Finding differences between computed and physical stock.
Updating Actual Physical Stock Records: Reflecting accurate data in the system.
Ensuring Proper Handling of Stocks: Maintaining correct procedures for stock management.
Objective
The main objective of conducting a stock audit is to safeguard the funds lent by banks, ensuring they are secure and accurately valued. An inventory audit, also known as a stock audit, involves evaluating raw materials and their transformation into finished goods. Keeping information updated about the quantity and quality of raw materials is vital.
Procedure of Stock Audit
The stock audit process, as facilitated by software like Infizo Stock, involves several steps:
1. Report Flash: Initial reporting of stock data.
2. Scheduling Stock: Planning the audit timeline.
3. Location Barcoding: Assigning barcodes to inventory locations.
4. Global Counting: Comprehensive counting of stock.
5. Scanning: Digitally scanning barcodes for accuracy.
6. Uploading of Scans: Uploading scanned data into the system.
7. Variance Analysis: Identifying and analyzing discrepancies.
8. Sign Off: Concluding the audit with a final review.
These steps are part of an ongoing process, starting from the initial stock entry into the system.
Other Asset Management Features Provided by Infizo Stock
Infizo Stock offers various features to help manage assets and inventory effectively, including:
Asset Management Software
Asset Tracking Software
CMMS Software
Inventory Management Software
Preventive Maintenance Software
Utility Management Software
Purchase Requisition Software
Helpdesk Ticketing System
Purchase Order System
When new stock arrives, it is registered, barcoded, and entered into the system for tracking. Barcodes are scanned each time an item is used, with the purpose noted in the system. This detailed record-keeping helps in analyzing stock usage and planning future requisitions.
Stock audits verify stock data and usage, ensuring that all activities are accurately recorded. By following the steps from barcoding to scanning and uploading, organizations can maintain accurate records and simplify the audit process.
Importance of Stock Audits
There are several key reasons for conducting stock audits
1. Identification of Slow-Moving, Dead-stock, Obsolete Stock, and Scrap: Helps in clearing out inventory that is not moving or is outdated.
2. Find Discrepancies: Identifies differences between recorded and physical stock.
3. Update Physical Stock: Ensures that recorded stock matches the actual stock.
4. Proper Preservation and Handling: Improves stock management practices.
The stock audit provides significant benefits
Reduced Costs and Improved Bottom Line: Optimizing inventory levels to reduce excess stock.
Prevention of Pilferage and Fraud: Implementing controls to prevent theft.
Accurate Inventory Valuation: Providing precise inventory data for financial reporting.
Reduced Gaps in Inventory Management: Streamlining processes to minimize discrepancies.
Third-Party Opinion: Gaining independent verification of stock records.
Enhanced Business Control Mechanisms: Improving overall business management through accurate data.
Stock Audit Checklist
Inventory is a critical area for any business, with a high risk of fraud. Therefore, strong controls, checklists, and regular stock audits are essential for efficient operations. Here's a checklist for inventory audits:
Stock Audit Software: Integrated with accounting systems to maintain accurate records.
Stock Evaluation Process: Includes the cost components and valuation methods.
Frequency of Verification: Regularly verifying stock records against physical stock.
Stock-Related MIS Formats: Using standardized formats for reporting.
Physical Security of Stock: Ensuring adequate security measures, including CCTV and fire equipment.
Insurance of Stock: Protecting against potential losses.
Inventory Categorization: Classifying inventory by value.
Inventory with Third Parties: Accounting for stock held externally.
Old and Expired Stock: Identifying and removing obsolete items.
Inventory Age Analysis: Monitoring the age of stock items.
Duplicate Inventory Codes: Avoiding duplication in records.
Conclusion
Asset management software like Infizo Stock offers a comprehensive solution for conducting internal stock audits. Here are some advantages:
Identifying Weaknesses in Accounting Systems: Enabling improvements based on audit findings.
Assuring Smooth Business Operations: Providing accurate information and reducing fraud risk.
Financial Benefits: Offering insights into business performance and profitability.
Enhancing Credibility: Boosting the reliability of financial data for investors.
Frequently Asked Questions (FAQs)
What is Stock Audit?
Stock audit or inventory audit refers to the physical verification of a company or institution's inventory assets. Every business organization should perform an audit annually to ensure that the physical stock matches the computed stock.
What is a Stock Audit Report?
A stock audit report documents the details or information about the existing stocks of the business gathered during a stock audit. Annual audit reports provide critical data for financial statements.
Why is Stock Audit Required?
A stock audit is necessary to reduce unnecessary investment in stocks and ensure proper balance in the process. High stock levels can lead to overstocking, poor cash flow, and financial loss.
What is the Purpose of an Audit?
The purpose of an internal audit is to ensure compliance with laws and regulations and maintain accurate and timely financial reporting and data collection. It helps management identify flaws in internal control or financial reporting before external auditors review them.
.png)
.png){kind=small}
