A stock audit is an independent examination of a company’s inventory and inventory records to confirm that quantities, condition and valuation match the books. Where a stock count tells you what is on the shelf, a stock audit also tests whether stock is valued correctly, recorded in the right period and protected by effective controls. Auditors, banks financing against inventory and investors in due diligence all rely on it.
Stock count vs stock audit
| Stock count | Stock audit | |
|---|---|---|
| Purpose | Confirm quantities | Confirm quantities, value and controls |
| Valuation | Not covered | Cost method, NRV, obsolescence |
| Controls | Not covered | Receiving, issues, returns, access |
| Output | Count sheets, variances | Audit report with findings |
The stock audit checklist
1. Physical verification
- Full or sample count of inventory at all locations
- Test counts from floor to records and records to floor
- Condition check: damaged, expired, slow-moving stock identified
- Third-party and consignment stock separated
2. Cut-off testing
- Last goods received notes and delivery notes before the count date
- First documents after the count date
- Goods in transit correctly recorded
3. Valuation
- Costing method applied consistently (FIFO or weighted average)
- Landed costs — freight, duty, handling — included correctly
- Net realisable value tested against recent selling prices
- Provisions for slow-moving, obsolete and expired stock
4. Records and reconciliation
- Inventory sub-ledger agrees to the general ledger
- Unusual or large adjustments explained and approved
- Negative stock balances investigated
5. Controls
- Segregation between receiving, storage, dispatch and recording
- Restricted warehouse and system access
- Regular cycle counts and variance reviews
Documents needed for a stock audit
- Inventory listing at the count date, with quantities and values
- Costing method and cost build-up for key items
- Purchase and sales invoices around the count date
- Goods received notes and delivery notes
- Previous count and audit reports
Frequently asked questions
Is a stock audit mandatory in the UAE?
There is no standalone legal requirement, but auditors must obtain evidence that inventory exists and is correctly valued, and banks often require stock audits for inventory-backed facilities.
How often should a stock audit be done?
At least annually, with quarterly or surprise audits for high-value or high-risk inventory.
What are the most common stock audit findings?
Unrecorded receipts or dispatches around cut-off, missing provisions for obsolete stock, landed costs not capitalised and unexplained system adjustments.
Get an independent stock audit
Calculate Capitals carries out stock audits in Dubai and the UAE, from physical verification to valuation and control review. Start with a stock count or ask about our inventory management systems. Contact our team.