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One of the most important audits for any business to establish is its assets. In any business, its assets are essential as they represent that organization's financial condition and position in the market. The physical assets of any business also act as a plan B in case the company has to or decides to dissolve.

Physical stock verification or stock audit includes counting, calculating and weighing all items in stock.

The Objectives of Physical Verification of Assets:

  • It is legal compliance that organizations need to comply with
  • It ensures the existence of assets of an entity
  • Enables valuation and rectification for any accounting inconsistency
  • To oversee internal compliances of the entity
  • It is essential in order to maintain continuous customer service

Thus, the physical stock verification process includes:

  • Comparing and documenting the asset tags and their serial numbers.
  • Manual evaluation of manufacturer model numbers.
  • The auditors compare the additional available information such as description, location and department and take them into consideration.
  • The process consists of a rigorous attempt to address the potential matches by description, manufacturer, model and serial number that may be documented elsewhere in each record entry.
  • Distribution of bulk entries and grouped assets to the individual assets (computer equipment, fixtures, manufacturing equipment, etc.)
  • Follow-up visits if required to confirm any residual assets and/or collect additional information.
  • Most importantly, the process includes setting up an audit trail for linking the reconciled inventory file with the current fixed asset accounting records.

Benefits of Physical Stock Verification and Reconciliation Services

It provides support to the value of stock shown in the balance sheet through physical verificationIt verifies the accuracy of stock recordsHelps in disclosing the possibility of fraudulent activity, theft or loss, or depreciationTo identify and address the weakness of the system, if any (i.e., whether the stock is in safe custody).The physical stock verification process conducts a line-by-line reconciliation of stock assets accounting records to assets found during the physical inventory taking process. All businesses need to carry out the extensive physical verification of stock audit at the end of every financial year, says Cush Consults.
 
We have a team of skilled consultants and supervisors who work by combining modern techniques and traditional values of physical stock verification to serve you. CUSH Consults offers excellent business advice and solutions for a wide range of clients, from financial institutions to start-ups to multinational companies.
 

Methods of Stock Verification:

There are three main methods of conducting physical stock verification, and they are as follows:
1. Periodic Verification: Under this method, the whole of the stock or all the assets verification is covered and processed together at the end of a financial year. The reason this is done only in small organizations is that small organizations have fewer assets as compared to large firms. Besides, the periodic verification method is not suitable for big industrial organizations since to complete work for several days is too long.
2. Perpetual Verification: Apart from all the other methods of stock verification, under this method, physical stock verification is stretched throughout the year according to a preset programme. The best part about this verification method is that neither the stores nor the employees have to stop or pause their day-to-functions as a result of the process. This method enables all the verifications to happen on a timely basis.
3. Blind Verification: When the stock verifiers have only given the location but not other details such as the code numbers, description and stock record balances, the basic logic here is that the verifier will not have his opinion about the stock position. This is one of the most popular methods of stock verification since it practically serves no purpose when the entire operation of stores has to be well-planned.

CUSH's Practices of Accounting Standards Related to Verification of Assets

At CUSH Consults, we follow all the Accounting Standards (AS) as per their relevancy to fixed-assets' accounting needs, inclusive of the physical verification of fixed-assets as our FAMS practices. 

Along with that, our team of FAMS Specialists can help you with:

  • Consolidation of all the physical reports for all locations, assets or inventories
  • Implement reconciliation procedures and match the records of physical and book count
  • Assess the difference, if any, and identify the justifications
  • Deliver Expert Physical Verification Reports

At the closure of the physical verification stock assets, we also provide an audit trail formulated on a spreadsheet, alongside several other specific reconciliation documents such as:

  • Matched Assets
  • Unrecorded Additions
  • Unrecorded Retirements

If you have any more questions about our physical stock verification process or need further understanding about our services, contact us!

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