The process of auditing is done through a set of rules and regulations as per the companies' act 2013. It examines the financial statement of a company to determine the prepared statements to be true and fair in terms of company affairs. Similarly, a stock audit is a process that refers to physical verification of the inventory which includes evaluation of inventory items based on the reference of the assignment. The stock audit process is necessary to reduce the avoidable investment on stocks or inventory to ensure proper balance in the process. As high levels of stock result in overstocking which may result in the poor value of cash flows and financial losses. The auditor's task is to check the statements during the process of examination. If he/she comes across with any fraud or discrepancy by the management of the company, then the auditor should mention those in his report. The auditor cannot perform an audit on assumption that management of the company might have committed fraud. The main reasons for executing the audit are to correct the discrepancies that are present in the stock record when verified with the physical stock bypassing necessary adjustment entries. Following are the reasons why it is looking forward to performing a stock audit:
The objective of conducting a stock audit is to ensure the security of funds that are lent by the bank, being safe and valued correctly. Inventory Audit also known as stock audit where the evaluation is done for raw materials that gets converted to finished goods. It is important to keep the information updated about the quantity and the quality of raw materials in stock.
According to a stock audit process of a software, there are certain steps that are in need to be followed, such as: