Inventory process audits

by Boundless Management Advisory Services

What is inventory ?

Inventory refers to tracking of a complete list of materials such as building materials, property or goods. The materials may be bought from another business/person or may be manufactured by the business itself. Inventory is current assets in the books of accounts and refers to the storage between sales of products and their production. The inventory is usually stocked in a warehouse and the business owning it usually intends to dispose it off within a year.

The cost of inventory to a company is the cost of goods sold which is recorded on the organisation's income statement.

Types of inventories

Manufacturing supplies

Finished goods

Work in process

Raw materials

Kinds of physical inventory counts

1. Perpetual- This kind of count involves counting inventory continuously for the whole year.

2. Periodical- This kind of count is made at the close or at the end of the specified period.

There are some risks involved in maintaining an inventory on a day-to-day basis. The risks pose a danger to inventory and the business who manages it.

What are the risks involved in maintaining an inventory?

1. When an inventory is inadequate or is insufficient for example stock out.

2. Another risk is invalid or obsolete inventory held which may lead to loss of customers or even cause damage to one's business reputation.

3.A possible risk is lack of security. If inventory is not kept secure then this may cause theft.

4.Non tracking or inappropriate tracking of inventory. This may result in inadequate supply when needed.

Inventory process audits

Audits of the processes used to maintain inventory are executed. These audits are held with the help of external auditors such as Boundless.

The audits measure the current process with the benchmark and returns the results to give you how efficient is the current inventory process, which is being used.

What is the need to audit an inventory ?

1.Some inventories might  be intangible in nature. To manage intangible inventories it is important to perform inventory process audits.

2. It is imperative to save on inventory losses. Wastage, dead stock and damage are all losses.

3. The audits provide valuation to all products.

4.Quantities of inventory held at a particular time may be difficult to build.

5.Some inventories are pretty hard to identify such as gas reserve stock and therefore require experts as auditors.

6. It might be a case that inventories are misreported. This might therefore further result into misreporting of profit.

A happy business

A business becomes successful if its customers are happy and when delivery is made on time to them. And all this comes from effective inventory management which further comes from effective inventory processes. Any deviations from effective processes can prove fatal to the organisation. Therefore, all what is required is a friend for auditing inventory processes.

For more details on inventories, call us at +91 8459136607 ; +91-9717771415 or e-mail at info@boundlessindia.comor visit us at http://www.boundlessindia.com.

Sponsor Ads

• Ad Space Available - Rent it Now!

Created on Dec 31st 1969 18:00. Viewed 0 times.

Comments