Schedule an Audit
Book a Consultation
Get a Free Quote
Get expert advice within 30 minutes
Hear how teams across industries use patron to save time, cut costs, & stay in control.
Director - Demandify Media
Founder and Managing Director - Hunarsource Consulting
I’ve had an outstanding experience working with my CA-patron Accounting . Their professionalism, attention to detail, and timely communication made th...
I'm glad that I was able to connect with Patron. They took the minimum time to do the calculations based on the details provided by me and were really...
Really a fantastic experience with Patron accounting especially Shubham, he was extremely great. Knowledgeable person who deserves the 5 star for smoo...
Patron Accounting gives the best service related to all account handling of our firm. I am blessed and extremely happy that Patron Accounting assigned...
I have called Patron to file ITR for my 5 family members. I worked with Shubham Junjunwala and Amin Jain. It was a smooth process. They understand bas...
From the very beginning, their approach has been highly professional, prompt, and solution-oriented. Every interaction reflected their deep knowledge,...
Very proficient and professional staff. Do fantastic job and instant response. Strongly recommended engaging them for all accounting needs specially f...
I contacted them to file the ITR. Shubham was the POC for me and he was really very professional and giving prompt responses. Recommend to give them a...
Get expert assistance for all your business registration needs
Stock Audit in India is an independent verification of a company’s inventory, conducted to ensure that physical stock matches book records. Governed by accounting and compliance standards under the Companies Act, 2013, and guidelines from the Reserve Bank of India (RBI) (particularly in the case of bank borrower audits), stock audit has become essential for businesses across industries.
A stock audit is a vital process that ensures the accuracy and reliability of an organization’s inventory records by comparing them with the actual physical stock. It plays a crucial role in safeguarding assets, maintaining transparency, and supporting sound financial management.
The audit covers all types of inventory, including raw materials, work-in-progress, and finished goods. Its primary objective is to identify and address discrepancies that may arise due to pilferage, damage, misplacement, recording errors, or product expiry. By reconciling physical stock with the stock recorded in the books of accounts, businesses can exercise better control over inventory and minimize operational losses.
In addition to operational benefits, audits are essential for statutory compliance and are frequently mandated by banks and financial institutions as part of credit evaluations, since accurate stock valuation is central to loan assessments. Conducted periodically, audits not only strengthen internal controls and reduce the risk of fraud but also provide reliable insights for planning, forecasting, and decision-making, thereby enhancing organizational accountability and financial credibility.
The applicability and limits define when businesses should undertake inventory verification and the thresholds that make such audits mandatory. These measures safeguard financial stability, ensure compliance, and strengthen inventory control.
Audits are essential for businesses and manufacturing units with high-value or fast-moving inventory, where even small discrepancies can have a significant financial impact. Borrowers from banks and financial institutions are also subject to audits, as the Reserve Bank of India (RBI) mandates periodic stock verification for credit facilities exceeding prescribed limits. Listed companies must conduct audits as part of corporate governance, ensuring transparency and reliability in reporting.
Regarding limits, audits for bank borrowers are generally required when credit exposure exceeds ₹5 crore, though thresholds may vary by bank or RBI directives. For manufacturing and retail businesses, periodic audits are considered best practice to maintain accuracy, efficiency, and long-term reliability.
Confirming that recorded balances match the actual stock.
Reviewing purchases, consumption, and sales to ensure proper accounting treatment.
Checking whether methods such as FIFO, LIFO, or Weighted Average are applied consistently and in compliance with accounting standards.
Identifying slow-moving, expired, or obsolete stock requiring adjustments or write-offs.
Ensuring assets are properly identified, recorded, and matched with the fixed asset register.
Confirming adherence to conditions imposed by banks or financial institutions for credit facilities.
A report is presented in a structured format to provide clarity, transparency, and actionable insights for management, lenders, and stakeholders. A typical report includes the following sections:
Concise overview of the audit, highlighting key findings, discrepancies, and overall inventory status.
Defines coverage, including reporting period, business units, and inventory types verified.
Explains audit techniques used, such as physical verification, sampling, reconciliation, and valuation checks.
Details significant issues, including mismatches between book and physical stock, shrinkage, obsolete or expired goods, and procedural lapses.
Suggests corrective and preventive measures to strengthen stock management, improve accuracy, and reduce risks.
Includes supporting documents like detailed stock registers, reconciliation statements, valuation workings, and ageing analysis.
Please Note: This structured format ensures that the report is comprehensive, facilitates informed decision-making, and provides transparency in inventory management.
The procedure is a systematic process designed to verify the accuracy of inventory records and ensure effective control over stock management. It helps organizations detect discrepancies, strengthen compliance, and provide assurance to stakeholders regarding the reliability of their inventory. The process is generally carried out in the following structured steps:
Define the scope, objectives, and timelines of the audit. Gain an understanding of the client’s business model, inventory systems, and internal controls, and gather preliminary information on stock levels, valuation methods, and storage practices.
Conduct site visits to warehouses, factories, or retail outlets. Count, tag, and document inventory items, and identify damaged, obsolete, or slow-moving stock.
Compare physical counts with book inventory, highlight shortages, surpluses, and mismatches, and investigate deviations arising from theft, errors, stock-in-transit, or misposting.
Prepare a detailed report of findings and discrepancies, recommend corrective and preventive measures, and submit the report to management, auditors, or banks along with suggestions for follow-up audits or control improvements.
An effective audit requires careful preparation and the availability of relevant records. The following documents and information are generally required to ensure accuracy and completeness of the audit process:
Stock audits often face operational and management challenges that require targeted solutions for accurate and efficient outcomes:
| Common Challenge | Patron Accounting Solution |
|---|---|
|
Discrepancies between physical and recorded stock |
Implement advanced reconciliation software and conduct detailed variance analysis. |
|
Difficulty in auditing multi-location or multi-SKU inventory |
Engage auditors skilled in ERP systems and centralized inventory management. |
|
Slow or delayed reporting of stock data |
Establish structured audit schedules with real-time reporting tools. |
|
Obsolete, expired, or damaged inventory is going unnoticed |
Maintain periodic ageing analysis and automated alerts for stock nearing expiry. |
The duration of an audit depends on the scale and complexity of operations. In India, it typically takes 7–15 working days, influenced by factors such as the number of stock locations, accessibility, and accuracy of ERP or inventory data, complexity of reconciliation, and scope of fixed asset verification. For large manufacturing units, multi-warehouse operations, or businesses with extensive inventory, the process may extend to 4–6 weeks to ensure thorough verification and accurate reporting. Proper planning, data readiness, and a systematic approach help optimize timelines while maintaining the accuracy and reliability of inventory records.
Stock audits and internal inventory controls are complementary processes that help organizations manage and safeguard their inventory, though they serve distinct purposes.
| Feature | Stock Audit | Internal Inventory Control |
|---|---|---|
| Objective | Independent verification of inventory accuracy | Day-to-day management and monitoring of stock |
| Frequency | Periodic (quarterly, half-yearly, or annually) | Continuous |
| Responsibility | External auditors or professional consultants | Internal staff, supported by ERP or inventory systems |
| Outcome | Detailed audit report highlighting discrepancies and recommendations | Real-time operational insights for effective stock management |
Patron Accounting offers specialized stock audit services across India, leveraging years of experience in statutory, internal, and sector-specific audits. Our team provides:
Stock Audit is more than a compliance exercise — it is a strategic tool for reducing losses, improving efficiency, and building trust with regulators and lenders. Whether you are a retail store, manufacturer, or borrower with bank exposure, timely audits can protect and grow your business. Partner with Patron Accounting today to schedule your professional stock audit.
Have a look at the answers to the most asked questions.
