Importance of Stock Audit :

Stock audit holds significant importance for businesses due to the following reasons:

• Accurate Financial Reporting : A stock audit helps ensure the accuracy and reliability of financial statements by verifying the physical existence and valuation of stock. It aids in presenting a true and fair view of a company's financial position.
• Inventory Management : Stock audit provides insights into inventory management practices, such as stock handling, storage, and tracking systems. It helps identify inefficiencies, obsolete stock, slow-moving items, or discrepancies in stock records. This information allows businesses to optimize inventory levels, reduce carrying costs, and make informed decisions regarding procurement and sales
• Fraud Prevention : Stock audit acts as a deterrent against fraudulent activities, such as theft, pilferage, misappropriation, or unauthorized disposal of stock. Regular stock audits help in detecting and preventing such irregularities, ensuring better internal controls and safeguarding the company's assets.
• Compliance with Regulations : Many industries have specific regulations and compliance requirements related to stock or inventory management. Stock audit helps ensure compliance with such regulations and standards, avoiding penalties and legal issues.

Documents Required for Stock Audit :

When conducting a stock audit, businesses need to gather and prepare certain documents to ensure a comprehensive and accurate assessment of their stock or inventory. The specific documents required may vary based on the nature of the business and the industry. Here are some commonly required documents for a stock audit :

• Stock Records :This includes records such as stock registers, stock cards, or electronic inventory management systems. These documents provide details of stock transactions, including receipts, issues, transfers, and adjustments.
• Purchase Invoices :Sales invoices help verify stock movements related to sales transactions. They provide details of the stock sold, including quantity, description, customer information, and selling price.
• Goods Receipt Notes (GRN) :GRNs are generated when stock is received from suppliers. They contain information about the supplier, purchase order details, quantity received, and any discrepancies or damages noted at the time of receipt.
• Delivery Challans :Delivery challans or dispatch notes are used when stock is transferred or dispatched to other locations or customers. They provide information about the quantity, description, and destination of the stock transferred.

Overview

Stock audit is a crucial practice for businesses to ensure accurate accounting, efficient inventory management, and prevention of fraud or discrepancies related to stock or inventory. It involves a comprehensive examination of a company's physical stock or inventory, its valuation, and reconciliation with the financial records. In this blog, we will discuss the importance of stock audit, the process involved, and how businesses can seek assistance from professionals in conducting stock audits.

Follow the general instructions listed below while furnishing the digital signature application form:

• The signature of the applicant should be in blue ink only
• The signature of the applicant should be as it is in the Identity Proof
• A photo of the applicant in the application form should be signed by the applicant
• All supporting documents should be attested by either Gazetted Officer / Bank Manager / Post Master
• For proof of attesting officer, either one of the below is mandatory –
• Contact Details of Attesting Officer including the name, designation, office address, and contact number. This should be part of the attestation. If provided separately, it should be attested either by the Applicant or Attesting Officer
• Self-Attested copy of the Organizational Identity card of the Attesting Officer
• Organizational Documents can also be attested by Authorized Signatory. However, if the taxpayer fails to get the Organizational Documents attested by the authorized signatory, an attested copy of the organizational ID card of the authorized signatory is mandatory.

How Digital Signature work

Like handwritten signatures, digital signatures are unique to each signer. The providers of digital signing solutions, such as DocuSign, follow a specific protocol called Public Key Infrastructure (PKI). PKI requires the provider to use a mathematical algorithm to generate two long numbers called keys. One key is public, and one key is private.
When someone electronically signs a document, the signature is created using the signer’s private key, which is always securely kept by the signer. The mathematical algorithm acts as a cypher, creating data matching the signed document, called a hash, and encrypting that data. The resulting encrypted data is the digital signature. The signature is also marked with the time that the document was signed. If the document changes after signing, the digital signature is invalidated.
For instance, suppose that Jane signs a timeshare sale agreement with her private key. The buyer receives the document. A copy of Jane's public key is also sent to the document's purchaser. If the signature is not Jane's or the document has changed since it was signed, the public key will be unable to decrypt it using the cypher that produced the keys. The signature is then invalid. To ensure the integrity of the signature, PKI mandates that keys be generated, carried out, and stored securely. As a result, a reliable Certificate Authority (CA) is typically required. Companies that provide digital signatures, like DocuSign, address the PKI criteria for secure digital signatures.

Process of Stock Audit :

The process of conducting a stock audit may vary depending on the nature and size of the business. However, the general steps involved are as follows :

Step 1 : Planning and Preparation - Define the scope, objectives, and timelines for the stock audit. Gather relevant documentation, including stock records, invoices, purchase orders, and stock-taking instructions.

Step 2 : Physical Verification - Conduct a physical count of stock on hand, ensuring accuracy, completeness, and proper segregation. This may involve tagging or labeling items, using barcodes or other identification methods

Step 3 : Valuation and Reconciliation - Determine the value of stock, considering factors such as cost, market value, obsolescence, or impairment. Reconcile the physical count with the stock records, identifying any discrepancies.

Step 4 : Documentation and Reporting - Prepare detailed audit working papers, documenting observations, findings, and recommendations. Generate comprehensive reports highlighting the audit results, including any identified risks, control weaknesses, or opportunities for improvement.

Step 5 : Follow-up Actions - Collaborate with relevant stakeholders to address the identified issues and implement corrective measures. Monitor the progress of corrective actions and conduct periodic reviews to ensure sustained compliance and improvements.