Inventory Stock Audit — accuracy at every SKU.
Independent physical verification, cycle counting, and AS 2 / Ind AS 2 valuation — ensuring inventory balances are accurate, obsolete stock is provisioned, and the financial statements reflect what is genuinely in the warehouse.
Inventory is one of the largest balances on most company balance sheets — and one of the easiest to get wrong. A small error in count, valuation, or cut-off directly flows to cost of goods sold, gross margin, and reported profit. For manufacturers, traders, and retailers, inventory accuracy is not just an audit question. It's a financial truth question.
Our inventory stock audit goes beyond a simple count. We verify physical quantities, test the valuation method against AS 2 or Ind AS 2 requirements, identify slow-moving and obsolete stock, check cut-off procedures around the count date, and reconcile the physical position with what your books and ERP report. The result is an inventory figure you can put your name to — and a list of control issues you can actually fix.
We work with manufacturing units, trading houses, retail chains, jewellery businesses, pharma distributors, and e-commerce warehouses across Mumbai and India — supporting year-end statutory audit teams, management seeking independent assurance, and businesses preparing for fundraising, acquisition, or insurance claims.
Inventory Audit Services We Offer
Physical Inventory Verification
Full or sample-based physical count of raw materials, WIP, finished goods, packing materials, and stores — with count sheets and audit trail.
Cycle Counting Audit
Designing and executing rotating cycle count programmes based on ABC classification — keeping accuracy high without disrupting operations.
AS 2 / Ind AS 2 Valuation Review
Verification of inventory valuation at lower of cost and NRV, FIFO or weighted-average cost build-up, and overhead absorption testing.
SKU-Level Reconciliation
Item-wise reconciliation of physical count against the inventory ledger and ERP system — flagging variances for management investigation.
Slow-Moving & Obsolete Review
Ageing analysis of inventory, identification of obsolete and non-moving items, and recommendation of provisioning under AS 2 / Ind AS 2.
Year-End Inventory Audit
Coordinated physical inventory verification at year-end to support the statutory auditor and ensure accurate closing balances.
WIP & Costing Audit
Stage-of-completion verification, BOM testing, and cost build-up review for work-in-progress in manufacturing environments.
ERP & Inventory System Audit
Review of inventory master data, transaction trails, costing methodology in ERP, and reconciliation between ERP, WMS, and books.
Our Inventory Audit Process
Scoping & Pre-Count Plan
Scope definition, location mapping, ABC classification, and a pre-count plan with cut-off, freeze, and count team assignments.
Cut-Off & Freeze
Cut-off procedures on inward and outward movements, freezing of system entries, and verification of last GRN and dispatch references.
Physical Count
On-site count with auditor presence, blind counts where required, condition checks, and identification of third-party or consignment stock.
Books vs Physical Reconciliation
SKU-wise variance analysis, valuation testing, ageing of slow-moving items, and quantification of shrinkage or overage.
Valuation & Reporting
Final valuation, provisioning recommendations, exception list, and a report with observations on controls and SOPs to strengthen.
Why Inventory Audit Matters
Frequently Asked Questions
An inventory stock audit is the independent physical verification, valuation, and reconciliation of inventory held by a business — covering raw materials, work-in-progress, finished goods, packing materials, and stores. The audit confirms what is physically present, matches it to the books, applies the correct valuation method under AS 2 or Ind AS 2, and surfaces obsolete or slow-moving stock that may need provisioning.
A bank stock audit is commissioned by a lender for borrowers with working capital limits — its primary objective is computing Drawing Power and protecting bank security. An inventory stock audit is commissioned by management or auditors with a financial reporting focus — its objective is accurate valuation under AS 2 or Ind AS 2, detection of shrinkage, and reliable year-end inventory figures for the financial statements.
AS 2 (and the corresponding Ind AS 2) require inventories to be measured at the lower of cost and net realisable value (NRV). Cost includes purchase cost, conversion cost, and other costs of bringing the inventory to its present location and condition. Acceptable cost formulas are FIFO and weighted average — LIFO is not permitted. The inventory audit verifies the cost build-up, tests NRV against current selling prices, and ensures adequate provisioning.
Cycle counting is the practice of counting a subset of inventory on a rotating schedule rather than performing one large annual physical verification. High-value or fast-moving SKUs are counted more frequently (monthly or weekly), while lower-value items may be cycled annually. For most businesses, a combination of periodic cycle counts and a single year-end physical verification gives the best balance of accuracy and operational disruption.
WIP audit involves identifying the stage of completion of each in-process item, applying the right cost components (material consumed, labour, applicable overheads), and verifying the cost build-up against engineering or job-card records. For manufacturing units, WIP valuation is often the most subjective inventory area — so the audit relies on production records, BOM documentation, and discussions with shop-floor and costing teams.
Cut-off procedures ensure that goods received and dispatched around the count date are correctly recorded in the right financial period. The auditor verifies the last few GRNs before count, the first few after, and matches them with invoices, dispatch notes, and inventory entries. Weak cut-off is a common source of inventory misstatement — goods in transit, in-bound items not yet received, or dispatched items not yet invoiced.
At minimum, a full physical inventory audit should be conducted at the financial year-end to support the statutory audit and ensure accurate year-end balances. Businesses with high inventory turnover, multiple SKUs, or multi-location warehouses benefit from quarterly or monthly cycle counts in addition to the year-end exercise. High-value or sensitive inventory (jewellery, electronics, pharma) may warrant continuous or perpetual audit procedures.
ABC analysis classifies inventory into three categories based on value contribution: Category A items are high-value (typically 70-80% of inventory value but only 10-20% of SKUs), Category B are moderate-value, and Category C are low-value, high-volume items. The audit plan applies more rigorous count procedures and frequent cycle counting to Category A SKUs, optimising audit effort where the financial impact is highest.
Get an Accurate Inventory Position
Talk to our team about a year-end inventory audit, a cycle counting programme, or an independent verification before fundraising or acquisition.
Talk to an Inventory Auditor or call +91 9819 000 511