What is a stock audit?

A stock audit is the physical verification of inventory and its valuation to ensure the actual stock matches the book records.

Why is a stock audit required by banks?

Banks require stock audits to verify the physical existence and valuation of stock that serves as collateral for working capital loans (like Cash Credit or Overdraft limits).

Who can perform a stock audit?

Typically, an independent Chartered Accountant (CA) with experience in stock audits is appointed by the bank or the company to conduct the audit.

How often should a stock audit be conducted?

For bank compliance, it is usually conducted quarterly or half-yearly. Statutorily, businesses should perform physical verification at least once a financial year.

What is the standard principle for stock valuation?

According to Accounting Standard 2 (AS-2) / Ind AS 2, inventory should be valued at the lower of cost or Net Realizable Value (NRV).

Which cost methods are allowed for inventory valuation in India?

The allowed methods are First-In, First-Out (FIFO) and Weighted Average Cost. The LIFO method is not permitted.

What happens if there is a discrepancy between physical stock and book stock?

The auditor will investigate the cause (e.g., theft, unrecorded sales) and recommend passing adjustment entries to reflect the actual physical stock in the financial records.

What is deadstock or obsolete stock?

Deadstock refers to inventory that has not moved for a long time and has lost its market demand, requiring it to be written down to its net realizable value.

What documents are needed for a stock audit?

Key documents include stock registers, purchase/sale invoices, bank sanction letters, insurance policies, and previous audit reports.

Can LIFO be used for stock valuation in India?

No, the Last-In, First-Out (LIFO) method is not permitted under Indian GAAP and Ind AS.

What is the drawing power in relation to stock?

Drawing power is the limit up to which a borrower can withdraw funds from a bank account, calculated based on the value of eligible stock and debtors, minus a margin.

Does a stock audit cover third-party warehouses?

Yes, an auditor must verify stock held at third-party locations, often by obtaining direct confirmations or conducting physical counts at those sites.

How does a stock audit help in cost reduction?

By identifying slow-moving and dead stock, companies can liquidate these items, saving on storage and carrying costs.

What is a cut-off analysis in a stock audit?

It is the examination of transactions just before and after the physical count to ensure all goods received or shipped are correctly accounted for in the right period.

Is insurance coverage checked during a stock audit?

Yes, the auditor verifies if the stock is adequately insured against risks like fire and theft, as required by banks and prudent business practices.

How does physical verification take place?

The auditor or audit team visits the premises and uses methods like barcode scanning, test counts, or full counts to physically verify the quantities and conditions of items.

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Precision and Accuracy

Identify mismatches and update your Inventory Records

A stock audit involves the physical verification of inventory and its valuation. It helps identify discrepancies between calculated stocks in books and the physical stock available in reality. By rectifying these mismatches, you can ensure your financial statements present a true and fair view of your assets.

It also helps pinpoint deadstock, slow-moving items, and scrap, allowing for better inventory management and cost reduction.

Compliance and Assurance

Fulfill statutory and banking audit requirements

For businesses with working capital loans, banks often mandate quarterly stock audits to verify the drawing power and ensure the stock is adequately insured and maintained. An auditor verifies the stock valuation according to Accounting Standard (AS) 2 / Ind AS 2, which requires valuation at the lower of cost or net realizable value (NRV).

We provide comprehensive audit reports detailing stock conditions, valuation accuracy, and internal control effectiveness, ensuring you remain compliant and financially sound.

Matched to AIS, before the department checks

Your return is reconciled line-by-line with Form 26AS and AIS so TDS mismatches never come back as a notice. Filing is only done after you approve the summary.

With standard services vs With our expert team

High risk of stock pilferage and unrecorded wastage
Overvalued inventory leading to inflated profits
Non-compliance with bank loan terms (CC/OD limits)
Poor identification of obsolete or deadstock
Inefficient inventory management processes

Accurate physical counting and reconciliation
Valuation strictly per AS-2/Ind AS-2 (Lower of Cost or NRV)
Full compliance with bank and statutory requirements
Clear identification of slow-moving and scrap items
Enhanced internal controls and cost reduction

How it works

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Upload Form 16 and answer a 5-minute questionnaire.
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Your assigned CA confirms income, deductions and regime on a short call.
Approve the summary

Review the computation and refund estimate; nothing is filed without your OK.
We file & you relax

E-filing, e-verification help and the ITR-V acknowledgement in your inbox.

Comprehensive Guide to Stock Audit AY 2026-27, explained

In simple words, the stock audit means physical verification of inventory; it may also involve the valuation of inventory depending upon the terms of reference. An inventory audit is considered a generally accepted auditing procedure. Stock Audit or Inventory check is a physical verification of quantities and conditions of items held in the warehouse. The reason behind this check is to know the position of existing stock and is independently checked.

In legal reference, a Stock audit is a statutory process which every business entity is required to perform at least once in a Financial Year. The stock audit process mainly involves the counting of physical stock present in the specified premises and verifying the same with computed stock as maintained by the company. The intention and purpose behind executing this is to rectify the discrepancies present in the booked stock when compared to physical stock by passing necessary adjustment entries.

Stock Auditor performs its audit on the behalf of the bank from which the auditee takes working capital loan. Our expert team ensures that the valuation of stock is done using the standard accounting principles for valuation, issued by ICAI i.e. Accounting Standard (AS) 2 Valuation of Inventories.

Documents you will need

Stock Register/Inventory Records
Purchase and Sales Invoices
Bank Sanction Letter (for bank audits)
Previous Stock Audit Report
List of Godowns/Warehouses
Insurance Policies for Stock

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Fraud Prevention

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Cost Reduction

Side income reported right, expenses claimed where eligible.

Bank Compliance

Old vs new compared on your real numbers, not thumb rules.

Accurate Valuation

We monitor your refund until it's credited.

Process Improvement

Missed the deadline or made an error? We fix it.

Notice shield

Filing reconciled with AIS/26AS to prevent the most common notices.

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Your expert stays reachable after filing, not just in July.

Stock Audit Service honest pricing

Comprehensive physical verification and valuation audit.

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Comprehensive Guide to Stock Audit why it pays to use an expert

In simple words, the stock audit means physical verification of inventory; it may also involve the valuation of inventory depending upon the terms of reference. An inventory audit is considered a generally accepted auditing procedure. Stock Audit or Inventory check is a physical verification of quantities and conditions of items held in the warehouse. The reason behind this check is to know the position of existing stock and is independently checked.

In legal reference, a Stock audit is a statutory process which every business entity is required to perform at least once in a Financial Year. The stock audit process mainly involves the counting of physical stock present in the specified premises and verifying the same with computed stock as maintained by the company. The intention and purpose behind executing this is to rectify the discrepancies present in the booked stock when compared to physical stock by passing necessary adjustment entries.

Stock Auditor performs its audit on the behalf of the bank from which the auditee takes working capital loan. Our expert team ensures that the valuation of stock is done using the standard accounting principles for valuation, issued by ICAI i.e. Accounting Standard (AS) 2 Valuation of Inventories.

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Identify mismatches and update your Inventory Records

Fulfill statutory and banking audit requirements

Matched to AIS, before the department checks

With standard services vs With our expert team

How it works

Share your documents

Talk to your expert

Approve the summary

We file & you relax