A stock count does not answer every inventory question
Quantity, ownership, timing and value need different evidence.
| Question | Useful check | Records needed |
|---|---|---|
| Does the listed stock exist? | Compare selected stock records with physical items and investigate count differences. | Item list, units of measure and documented count results. |
| Has everything held been recorded? | Trace selected items on the premises back to the listing. | Warehouse locations, item identifiers and transfer records. |
| Does the company own the goods? | Separate company-owned stock from consignment and third-party holdings. | Purchase terms, consignment agreements and storage confirmations. |
| Were movements recorded in the right period? | Check receipts, dispatches and transfers around the count date. | Dated movement records and stock-system entries. |
| Is the recorded value recoverable? | Review cost and, where IAS 2 applies, net realisable value. | Costing records, ageing, condition and selling-cost evidence. |
Agree valuation and ownership procedures explicitly; a quantity-only count cannot establish either.
We establish the locations, date and reporting purpose before the count, including how receipts and dispatches will be controlled.
Define the population and control stock movements
We review the stock listing, storage locations, item identifiers and units of measure before the count. The plan considers goods in transit, third-party storage, consignment stock and items that need special access. Management remains responsible for its count instructions and stock records. We agree how receipts, dispatches and transfers will be controlled or logged around the count so that movements do not create unexplained differences between the physical quantity and the system.
Investigate differences instead of simply adjusting them
Depending on the engagement, procedures can include observing counts, selecting test items, tracing records to stock and stock back to records, and reconciling results with the ledger. Exceptions are grouped by cause where evidence permits. A repeated discrepancy may indicate a units issue, weak transfer controls or unrecorded damage. Management approves any adjustments; the report distinguishes a verified correction from a difference that still needs investigation.
Separate quantity, ownership and value
A correct count does not by itself establish ownership or carrying value. Where IAS 2 applies, the IFRS Foundation explains that inventory is measured at the lower of cost and net realisable value. A valuation review may therefore consider costing, ageing, condition and evidence of expected selling proceeds and necessary costs, within the agreed scope.
Specialist appraisal, technical quality certification and testing every item are not implied by a general inventory engagement. If the work is intended to support a financial-statement audit, the external auditor should be involved in planning. That auditor determines whether and how the procedures and evidence can be used for its own reporting purpose.
Documents and records to prepare
Tick the records you already have. The final request depends on your entity, the period and the work agreed. Please do not send financial records through this website.
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Related reading: UAE accounting records: how long to keep them and how to organise the archive.
How the work starts
Scope the stock
We agree the purpose, locations, stock categories and date, then identify access, safety and third-party dependencies that affect the work.
Plan the count procedures
We review management’s instructions and agree the verification approach, including how movements and exceptional items will be recorded during the exercise.
Verify and reconcile
The agreed checks are performed and compared with the records. Differences are investigated with supporting documents and management explanations.
Report the findings
We deliver the agreed results, distinguish resolved and unresolved items and identify practical control actions and any additional valuation work required.
What affects the scope and fee?
- Number of locations and stock-keeping units
- Count coverage and sampling approach
- Storage access and stock characteristics
- Condition of inventory records
- Reconciliation and valuation-review depth
We set out the deliverables, responsibilities and fee in the proposal. Work outside that scope is discussed before it is added.
Inventory audit FAQs
Is an inventory audit the same as a stock count?
Not necessarily. A stock count establishes quantities at a point in time. An inventory engagement may also examine records, cut-off, ownership, costing or controls. The proposal defines which procedures are included and what the resulting report means, so a quantity check is not mistaken for a full valuation or financial audit.
Do you count every item?
The coverage depends on the purpose, stock population and agreed method. Some engagements involve observation and selected test counts, while others require broader verification. We define coverage before work starts and explain the limitations in the report. No claim of complete verification should be made where only selected items were tested.
Can trading continue while the count takes place?
Sometimes, but movements need a controlled procedure. Receipts, dispatches and transfers must be identified so quantities can be reconciled to the chosen count point. We discuss the operating constraints with management during planning. An uncontrolled moving population can reduce the reliability of the exercise and create avoidable recount work.
How are damaged or slow-moving goods handled?
We record observations within the agreed procedures and ask management for evidence about condition, usage and sale prospects. A valuation conclusion needs more than a visual label. Technical testing or specialist appraisal may be required for some goods. Management remains responsible for proposed write-downs and for providing the supporting commercial information.
What about goods held by a warehouse or customer?
We identify third-party holdings during planning and agree the evidence needed, which may include access arrangements, records or confirmations. Ownership and the location of goods are separate questions. Consignment terms and goods held for others must be distinguished so quantities are not added to the wrong entity’s inventory.
Will our external auditor accept your report?
The external auditor decides what evidence it requires and whether it can use work performed by others. Involve that auditor before scheduling the count if the engagement is intended to support the annual audit. A standalone stock report should not be assumed to satisfy procedures that were never agreed with the auditor.
Sources and further reading
Original page research: 5 October 2026. Service comparison and preparation checklist updated: 9 October 2026. Requirements can change; check the linked authority guidance for the latest position.
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