A stock audit confirms that inventory exists, is in usable condition and is valued correctly. Banks commonly require periodic stock audits of borrowers with working capital limits; the scope then follows the bank's format.
Scope of service
- Physical verification on a test or full basis
- Comparison with book stock and stock statements
- Ageing and identification of slow-moving or obsolete stock
- Valuation method review
- Drawing power computation for bank audits
Regulatory framework
- Bank-specific stock audit formats and sanction terms
- AS 2 / Ind AS 2 — Valuation of Inventories
- CAS 6 (Material Cost)
Typical professional activities
- Count planning and cut-off procedures
- Reconciliation of differences
- Report in the prescribed format
Applicable industries
- Manufacturing
- Automobile & Auto Components
- Pharmaceuticals
- Sugar & Agro Industries
- Trading & Distribution
Relevant articles and resources
Frequently asked questions
Can a Cost Accountant conduct a bank stock audit?
Yes. Banks appoint Cost Accountants for stock audits of borrowers under their empanelment criteria, and RBI has advised banks to engage Cost Accountants for stock audit.
What does a stock audit check?
Physical existence and condition of inventory, agreement with stock statements submitted to the bank, valuation, ageing, slow-moving and obsolete stock, and the drawing power available to the borrower.
The information on this page describes the nature of the service. It is not advice on any specific matter. See the disclaimer.