Inventory Stock Audit Services

Q: How is work-in-progress (WIP) valued in a stock audit?

WIP valuation involves verifying the stage of completion and cost components — raw materials, direct labour, and manufacturing overheads — assessed against the business's accounting policy and applicable accounting standards.

Q: What is a stock statement and why do banks require it?

A stock statement is a periodic submission to the lending bank showing the value of inventory and debtors, from which drawing power is calculated. A stock audit independently verifies that the stock statement figures reflect actual inventory on hand.

Q: Can an inventory stock audit be conducted without disrupting operations?

Yes. Audits are scheduled at times minimising disruption — shift changeovers, weekends, or low-production periods. Zone-based counting allows partial operations to continue during larger audits.

Physical Verification of Raw Materials, WIP, and Finished Goods for Accurate Inventory Control

An inventory stock audit is a systematic physical count and independent verification of all inventory — raw materials, work-in-progress, and finished goods — held at one or more locations. It confirms that physical quantities match book records, identifies discrepancies arising from shrinkage, damage, pilferage, or recording errors, and provides management and lenders with accurate inventory data.

Inventory inaccuracies directly impact profitability, working capital planning, and the reliability of financial statements. Our inventory stock audit services serve manufacturing businesses, trading companies, retail chains, and businesses with bank working capital facilities requiring periodic inventory verification. This service is part of our broader stock audit services offering and works alongside our warehouse audit and fixed asset verification engagements for businesses requiring comprehensive physical verification.

Our Inventory Stock Audit Services

Physical Stock Count

Organised physical counting of all inventory categories — raw materials, WIP, and finished goods — at the business's premises using systematic count sheets and reconciliation procedures.

Book-to-Physical Reconciliation

Detailed reconciliation of physical count results against inventory records in the ERP or stock register, with quantification of all variances by item, category, and location.

Obsolete & Damaged Stock Identification

Identification and separate reporting of obsolete, slow-moving, damaged, or expired inventory requiring write-down or disposal.

Valuation Verification

Review of the inventory valuation method (FIFO, weighted average, or standard cost) and assessment of whether valuations are consistent, appropriate, and in line with accounting standards.

Bank Drawing Power Calculation

Preparation of the stock statement and drawing power calculation as required by lending banks under cash credit or overdraft facilities against inventory.

Multi-Location Stock Audit

Coordinated physical verification across multiple storage locations, factories, or branch offices to provide a consolidated and complete inventory position.

Benefits of Regular Inventory Stock Audits

Confirms the accuracy of inventory records used for financial reporting
Satisfies bank requirements for periodic stock verification under working capital facilities
Identifies pilferage, shrinkage, and obsolete stock that erode margins
Supports accurate working capital planning and procurement decisions
Strengthens internal controls over stock receipt, movement, and dispatch
Reduces the risk of inventory-related adjustments at year-end statutory audit

Frequently Asked Questions

What is the difference between a cycle count and a full physical inventory count?

A full physical inventory count involves counting all inventory at a single point in time, usually with operations halted or significantly reduced. A cycle count is a continuous counting process where a portion of the inventory is counted on a rotating basis throughout the year. Full counts provide a complete verification at a point in time; cycle counts maintain accuracy without disrupting operations, but both serve as important internal controls.

How is work-in-progress (WIP) valued in a stock audit?

WIP is one of the most challenging inventory categories to value. The auditor verifies the stage of completion for each WIP item and the cost components included — typically raw materials, direct labour, and an appropriate allocation of manufacturing overheads. The valuation is then assessed against the accounting policy adopted by the business and any guidance from applicable accounting standards.

What is a stock statement and why do banks require it?

A stock statement is a periodic submission (usually monthly) made by a borrower to its lending bank showing the value of inventory and debtors, from which the bank calculates the drawing power — the maximum amount the borrower can draw under its working capital credit facility. The stock audit provides independent verification that the stock statement figures reflect actual inventory on hand.

How does an inventory audit help identify pilferage?

Discrepancies between physical counts and book records, particularly recurring shortages of specific high-value items, can indicate pilferage. The auditor analyses discrepancy patterns across locations, categories, and time periods. While the stock auditor does not investigate fraud, the report provides management with the data needed to identify suspicious patterns and initiate further investigation.

Can an inventory stock audit be conducted without disrupting operations?

Yes. We work with businesses to schedule audits at times that minimise operational disruption — such as shift changeovers, weekends, or periods of low production activity. For large operations, we use systematic zone-based counting to allow partial operations to continue. Advance planning and coordination with the client's team is central to a smooth, efficient audit process.

Your Books Say One Thing. Let's Verify the Reality.

Rigorous inventory stock audit services — independent, accurate, and bank-compliant.