Physical Verification
Not able to identify how much stock or inventory do you have?
We can do physical verification of your inventory for you via scientific methods to recognize the actual inventory and can give you a detailed report about variances too.
2000+
50+
100%
8+ Years
Introduction
Every business institution at least needs to perform a stock audit once a year to update and ensure that the physical stock and the computed stock match.
A stock audit helps correct discrepancies between the physical stock and book stock can be corrected.
Stock audit, in general usage is considered as an important auditing term which refers to the physical verification of the inventory.
In other words, stock audit is a statutory process which every business institution needs to perform at least once in a financial year.
In other words, stock audit is a statutory process which every business institution needs to perform at least once in a financial year.
As far the stock audit process is concerned, the process mainly involves the counting of physical stock presenting the specified premises and verifying the same with computed stock maintained by the company.
Documents
The documents required for stock Audit are listed below:
From the Bank Branch Officials:
Particulars of Collateral Security
Outstanding balance in all accounts with the Bank.
Stock Statement duly certified by a CA. for the previous month.
Bank Statement for the last three months.
Sanction Letter.
From the Borrower:
Copy of the latest audited balance sheet.
Stock Statement
Insurance Policy.
Method of valuation followed for Inventory with detailed working.
Invoices of Purchases & Sales, Stock Register, & other supporting Documents for verifying internal controls.
Sales break up into export and domestic.
Details of non-moving and obsolete stock
Month-wise details of purchases and sales, stock, debtors and creditors for the previous six months.
Copy of Incorporation of the Company.
Objective
To identify the discrepancy between book stocks also known as computed stock and physical stock.
To ensure proper preservation and handling of stocks.
To update the actual physical stock as book stock.
Identify the slow-moving stock, deadstock, obsolete stock, and scrap
Procedure used in stock audit
In performing stock auditing, there are several procedures that could occur, which include the following:
01
Cut-off Analysis - This involves the test of the last few receiving and shipping transactions before conducting the physical count and transactions that follow it. This makes sure that they are fully accounted for.
02
Physical inventory counting - It involves the process of counting every piece of inventory assets to account for them all. An auditor usually uses technology like a bar code scanner to physically count each item.
03
Inventory layers - The process undertaken to find out which inventory methodology is used (such as LIFO, FIFO etc.) and whether it is valid.
04
Inventory-in-transit analysis - An analysis to track the time between the date of shipment and the date of receipt when materials are moving between two locations or more. This audit helps to make sure that all the items are safe and are not lost while in transit.
05
Finished-goods cost analysis - the inventory which have been completed and are ready to sell is known as finished goods. An auditor then analyses the value of the inventory for the current accounting period.
06
ABC analysis - An ABC analysis includes grouping different value and volume inventory. For example, high-value inventory, mid-value, and low-value products can be grouped separately. The items can be tracked and stored in their separate value groups as well.
07
Overhead analysis - Overhead analysis includes analysing the indirect costs of the business and overhead costs that may be included in the costs of inventory. Rent, utilities, and other costs can be recorded as part of inventory costs in some cases.
Reconciliation - Reconciliation includes solving discrepancies that are found in an inventory audit. Errors may be re-checked and reconciled on financial records.
Importance
Observation of inventory is a generally accepted auditing procedure, where an independent auditor issues an opinion on whether the financial records of inventory accurately represent the physical inventory being carried.
Auditing inventory must verify not only the amount of inventory but also its quality and condition to see whether the value of the inventory is fairly represented in financial records and statements.
Auditing inventory is an important aspect of gathering evidence, especially for manufacturing or retail-based businesses. It can represent a large balance of assets or capital.
Why FinAccle
Finaccle provides one-stop integrated Financial-Accounting-Legal solutions to its clients.
You get all Financial, taxation, Accounting, and legal solution under one roof.
We provide End-to-End Support for the audit procedure.
We ensure seamless paperwork.
Quality is what we pursue. We are always Accessible, Approachable and Accountable.
You can connect with us through mail, what's app, call or personal visit.
We shall provide you the result that will move you.
Got a question?
We've got answers.
What is physical verification of fixed assets?
Physical verification is the process of checking whether the assets recorded in your books actually exist at your premises and whether their condition and records match. It helps ensure accuracy in financial statements.
Why is physical verification of assets important for businesses?
How often should physical verification of assets be conducted?
What does the physical verification process include?
What documents are required for physical verification?
How can Finaccle help with physical verification of fixed assets?