Inventory Audit
A practical starting point for assessing whether inventory is safeguarded, accurately recorded, properly valued and issued or received only through authorised processes.
What are we trying to establish?
Determine whether inventory is safeguarded, accurately recorded, properly valued and issued or received only through authorised processes.
Risks worth paying attention to
What should you request?
- Inventory listing and stock ledger
- Goods received and issue notes
- Stock count instructions and count sheets
- Inventory adjustment reports
- Obsolete and slow-moving stock reports
- Purchase and production records
- Warehouse access records
- Inventory valuation workings
Understand the process before testing.
- Who initiates, reviews and approves transactions?
- Which duties should be separated?
- What system controls and approval limits apply?
- How are exceptions identified, approved and monitored?
- How does management know key controls actually operated?
Practical tests you can perform
Observe and test physical counts
Obtain appropriate evidence, investigate exceptions and document your conclusion.
Trace samples from floor to records and records to floor
Obtain appropriate evidence, investigate exceptions and document your conclusion.
Analyse negative balances and unusual adjustments
Obtain appropriate evidence, investigate exceptions and document your conclusion.
Test receipts and issues around period end
Obtain appropriate evidence, investigate exceptions and document your conclusion.
Review ageing and obsolete stock
Obtain appropriate evidence, investigate exceptions and document your conclusion.
Recalculate selected inventory valuations
Obtain appropriate evidence, investigate exceptions and document your conclusion.
Review access and segregation of duties
Obtain appropriate evidence, investigate exceptions and document your conclusion.
Investigate recurring stock variances
Obtain appropriate evidence, investigate exceptions and document your conclusion.
Things that should make you look deeper
- Transactions or activities outside normal patterns
- Missing or retrospective approvals
- Repeated exceptions without root-cause action
- Manual adjustments with weak supporting evidence
- Key controls dependent on one person
- Management reports that cannot be reconciled to source records
Questions that can open up the process
- What can go wrong in this process?
- Which controls are most important, and who performs them?
- Where does the process depend heavily on manual intervention?
- Which exceptions occur most often, and why?
- What information does management use to know the process is working?
Need a more detailed checklist?
Steal My Checklist contains ready-to-use audit procedures designed to help you structure fieldwork across key business areas.
Get Steal My Checklist