Stock Audit in Dubai : Accuracy, Compliance & Efficiency
Stock Audit in Dubai
A stock audit aims to preserve the correctness of inventory records and validate the realizable worth of a company’s assets by physically evaluating the inventory and reconciling it with accounting records.
Why an Organization needs Stock Audit?
Record accuracy: Decision-making and financial reporting depend on accurate stock records. By assisting companies in balancing their physical inventory with accounting records, stock audits lower the possibility of inaccuracies and financial irregularities.
Finding obsolete and slow-moving stocks: Stock audits assist in locating damaged, expired, or obsolete inventory goods that may require write-offs, disposals, or revaluations.
Optimizing Cash Flow: Businesses can enhance their cash flow and utilize resources more effectively by steering clear of pointless stock investments.
Comprehending Trends in Stock Movement: This aids in comprehending stock movement and making well-informed judgments regarding production and purchases, guaranteeing that the company stays flexible and responsive.
Detecting inconsistencies and Fraud: Stock audits serve as a defense against inconsistencies and fraudulent activity. Businesses can improve their internal controls and take corrective action by recognizing abnormalities.
Real Value Assessment: By assessing the stock value, one can avoid overvaluing or undervaluing the inventory that is currently on hand.
When to Carry Out Stock Audits ?
External Audit: Larger audit firms performing an external audit on a client. They require a third party to verify the stock count and guarantee accuracy as part of their audit.
Liquidation: A stock audit at the time of liquidation ensures an equitable division of assets by giving a clear picture of the stock’s count and worth.
Transition to Automated System: Physical stock audits are carried out when businesses switch from manual to automated systems in order to incorporate precise inventory data into the new systems.
Inventory financing: In this scenario, lenders need an external certification of the worth and status of the inventory. This certification assists lenders in determining the value of the collateral and reducing risks.
Stock Audit Methodologies
Physical Counting: This method involves physically counting each item of inventory that is kept on the company’s premises.
ABC Analysis: ABC Analysis is a process for analysis in which inventory is categorized based on its significance or worth to the company. Businesses may prioritize their inventory and make informed decisions by classifying inventory using ABC analysis.
Cut-off Analysis: To avoid errors, this method temporarily pauses operations like receiving and releasing inventory during the audit.
Additional Analytical Procedures: To guarantee financial accuracy, stock audits may incorporate financial measures including gross profit, inventory turnover ratio, cost of inventory, and inventory on hand.
List of Documents Required for Stock Audit
In order to enable a fruitful stock audit, the subsequent records are necessary:
- As on the audit date, the stock statement
- The most recent audited financials
- If any, a stock insurance policy
- Sample Purchase and Sales Invoices