As year end draws closer, its becomes quite vital for management of any enterprise to plan across a systamatic and monitored approach on verification of stock in hand and its valuation. though a general thumb rule cannot be applied considering the nature of industry, type of organisation and the size of industry as well as the product, the challenge always lies on the process followed and the IQ of management in compiling data, which of importance.

I invite guidance from fellow professionals and faternity to share your experiences, methodologies and more importantly the approach on ensuring time, effectiveness and appropriate valuation of stock.



CA. S Kamath

Posted 2 years, 10 months ago by CA Sundeep Kamath

Stock Audits are not only inmportant to find the actual inventory vs inventory as per books, but also to comply with different legal rules.

The inventory verification methodology is different in each industry. The most challenging industries are construction and chemical.

I had an experiance of verifying the physical inventory lying at contruction site. Estimating the number of small stone, jellies, and counting the number of cement bags etc. was challenging and had a chance to look at the state of labours in cement godowns.

The ABC method is most suitable if inventory is huge in numbers and valuation is available. 100% verification for the stocks which posses the risk of being manipulated and can affect the going concern status of organisation if manipulated.

Posted 2 years, 10 months ago by CA Pulkit Sharma

I have few basic questions on stock audit, which an person needs to take care while conducting an stock audit

a. Size of entity

b. Nature of Industry

C. Volume of stock

d. Stock levels records

e. Process followed by the industry for issuance, receipts & storage.

f. Product sales cycle

g. Inventory & Stores Maintenance methods ( ex: Bin card or Kan ban cards etc)

h. Internal Management reports on Inventory shortage, Previous year trends on Inventory shortages, theft, consumption

I. Cut-off Procedures on Inward receipts, issues to production, Quality Inspection & more importantly the sales dispatches & inward receipts for first 5 days.

If you dont beleive me visit Mysore road any time around end of FY 2014 march 30 or 31st towards bidadi, you can see trucks loaded with soft drinks parked outside the factory premises....Remember you have two issues AS-9 & AS-2.



S Kamath

Posted 2 years, 10 months ago by CA Sundeep Kamath


1)Delay in Raising GRN (if any after entering into the factory gate should be considered) more delays should be enquired.

2)Special attention can be given to "Returnable register"(Maintained to register goods sent out for some repair and will come back to factory again) maintained at factory:

It is possible that some items will take out of factory for some repair or reconditioning but the same will not come back, we should find such cases and can take to management for their attention


I have found cases where iron pipes and say motors will take out of company and the same will be soldoff they will not come it is Returnable register if proper monitoring is not in place it will go off

Posted 2 years, 7 months ago by Ganesh babu k

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