What You Need to Know About Stock Audit and How It’s Done

A stock audit is the process of physically checking a company’s inventory to ensure that it matches the records. It helps identify any discrepancies, detect deviations, and report inconsistencies in stock management.

Effective stock audits provide businesses with the assurance of accurate inventory records, which directly impact financial integrity and decision-making. Using inventory software can streamline this process by automating stock tracking and generating detailed audit reports.

Want to learn more about how stock audits can improve your business operations? Keep reading to discover the benefits and best practices for conducting an efficient stock audit.

What is a Stock Audit?

A stock audit is the process of verifying the physical inventory against the recorded stock levels to ensure accuracy and completeness. It involves counting, measuring, and evaluating the condition of goods to detect discrepancies, mismanagement, or errors in inventory records.

Stock audits provide businesses with confidence that their inventory is accurately accounted for and valued, safeguarding against issues such as theft, damage, or misplacement.

Stock audits can be performed either internally by company staff or externally by third-party auditors. Internal audits are typically carried out by the business’s employees, ensuring they are familiar with the inventory system.

On the other hand, external audits bring an objective perspective and often follow regulatory or licensing requirements. Both methods aim to ensure accurate inventory management and financial transparency.

Why is Stock Audit Important?

Stock audits play a vital role in ensuring that businesses maintain accurate and transparent inventory records. By regularly conducting stock audits, companies can not only safeguard their assets but also make informed decisions that enhance overall efficiency. Here’s why stock audits are crucial:

1. Prevents fraud and theft: Stock audits help detect discrepancies that may indicate fraud or theft, protecting businesses from significant financial losses.
2. Optimizes inventory management: Audits provide valuable insights into stock performance, helping businesses identify slow-moving or obsolete items and optimize their inventory for better space utilization and cash flow management.
3. Ensures legal and regulatory compliance: Accurate stock records are essential for meeting accounting standards, tax regulations, and other industry guidelines, thereby helping businesses maintain compliance.
4. Improves financial accuracy: Regular audits ensure that inventory discrepancies don’t affect financial statements, providing a more accurate picture of the company’s financial health.
5. Enhances decision-making: By evaluating the condition and status of their inventory, businesses can make more informed decisions regarding pricing, promotions, and inventory control, thereby boosting profitability.

How to Do a Stock Audit?

Conducting a stock audit involves a series of steps designed to ensure the accuracy of your inventory and financial records. While the process can vary depending on the business size and complexity, here’s a general outline of how to perform a stock audit:

1. Preparation
   Before beginning the audit, set clear objectives and define the scope of the audit. Gather all relevant documents, including inventory records, sales data, and any previous audit reports. Design audit procedures and create checklists to guide the process.
2. Physical verification
   Start by physically counting the stock items. You can choose from methods such as item-by-item counts, cycle counts (focused on specific products over time), or spot checks (verifying a few products). Ensure that you segregate damaged or obsolete stock during the count.
3. Double-check findings
   It’s important to double-check the counts to minimize human error. Using technologies like UPC or QR codes can help streamline and digitalize the process. Cross-verify the results to ensure the most accurate count possible.
4. Stock valuation
   Apply appropriate inventory valuation methods, such as the First-In, First-Out (FIFO), Last-In, First-Out (LIFO), or weighted average, to determine the cost of the stock. Ensure consistency with accounting standards and verify the accuracy of cost calculations to maintain financial integrity and transparency.
5. Reconciliation
   Compare the physical stock count with the book records. Investigate any discrepancies and resolve them by adjusting the stock records accordingly. Update your inventory systems to reflect the corrected data.
6. Documentation and reporting
   Finally, document all findings and prepare a detailed audit report. Include observations, discrepancies, and any recommendations for improving inventory management. Present the report to management and stakeholders for further action.

Stock Audit Checklist

To ensure a thorough and accurate stock audit, here’s a comprehensive checklist to guide you through the process:

1. Confirm that the physical goods audit has been double-checked for accuracy.
2. Investigate and explain any discrepancies found during the audit.
3. Identify and explain any shortages discovered in the stock.
4. Flag items that have become obsolete since the last inventory verification.
5. Address any surplus items by properly documenting or reclassifying them to ensure accurate records.
6. Review and optimize stock items that are too expensive to maintain.
7. Ensure all items, especially obsolete or slow-moving stock, are appropriately documented in the records.
8. Verify that relevant rules and regulations related to inventory management are correctly documented and followed.
9. Ensure that financial records and inventory sources are regularly and accurately updated.
10. Properly document all incoming and outgoing materials to maintain traceability.
11. Identify any manual auditing processes that can now be automated for better efficiency.
12. Ensure that any discrepancies found are within the expected range and are adequately addressed.

This checklist ensures your stock audit is thorough, accurate, and aligned with best practices. To further streamline the process, the right tools can significantly simplify it. Download our pricing scheme to see how our solutions enhance accuracy and efficiency in audits.

Maximize Your Stock Audit with HashMicro Inventory Management Software

As highlighted earlier, conducting regular stock audits is crucial for maintaining accurate inventory records and ensuring operational efficiency. To support this, HashMicro offers an inventory management software solution designed to streamline stock audits and improve accuracy in real-time.

HashMicro Inventory Management Software is Singapore’s premier solution for efficient stock audits, trusted by over 2,000 leading enterprises across Southeast Asia. It provides a robust system equipped with tools that support seamless inventory tracking and auditing.

Key features of HashMicro Inventory Management Software that support stock audits include:

1. Integrated with Hashy AI for Inventory: The system monitors stock levels, notifies users of low stock, recommends purchases, manages reorder and purchase requests (PR), tracks PR status, alerts on expiring products, and handles internal transfer requests.
2. Putaway strategy: The system assigns storage locations automatically based on product type, category, or available space, simplifying the storage process.
3. Quality control management: The system tracks goods during receiving and shipping, categorizing them as accepted or rejected based on quality checks.
4. Integrated with weighing scale: The system reads weight data directly from connected weighing scales, removing the need for manual entry during receiving or shipping.
5. 3D warehouse overview: Users can view a 3D map of the warehouse, displaying product locations and quantities at specific points for enhanced inventory management.
6. Integrated with barcode, QR, and RFID: The system supports barcode, QR code, and RFID technology for tracking products and locations, ensuring easy and accurate inventory tracking.
7. Product expiry dashboard: The system provides real-time data on products nearing expiration and sends notifications, allowing for easy tracking of expiring goods.

HashMicro also offers CTC grants of up to 70%, enabling businesses to leverage financial support and enhance their invoicing and financial management processes with advanced software solutions.

Conclusion

To conclude, a stock audit involves physically verifying a company’s inventory against its recorded data to detect discrepancies and ensure accuracy in stock management. This process enables businesses to maintain optimal stock levels, minimise losses, and provide financial integrity.

With HashMicro Inventory Software, businesses can streamline stock audits by automating real-time inventory tracking and generating comprehensive audit reports, reducing errors and time spent.

Ready to simplify your stock audits? Try HashMicro Inventory Software today with a free demo and see how it can enhance your inventory management.

Frequently Asked Questions About Stock Audit

• What’s the difference between a stock audit and a stock verification?

  A stock audit involves physically checking inventory against recorded records to identify any discrepancies or deviations, ensuring accuracy. While stock audit and stock verification are often used interchangeably, they essentially refer to the same process.

• How is an inventory audit conducted?

  An inventory audit involves both counting and assessing a business’s goods, comparing them to the recorded inventory. Unlike a simple inventory count, an audit also examines items for potential issues such as damage, spoilage, or errors.

• Who performs inventory audits?

  Inventory audits are conducted by auditors or other responsible parties, who compare the physical stock with the financial records. This process can involve simply counting the stock and verifying its alignment with the company’s accounting records.