What Do You Really Mean By The Stock-In-Trade And How An Auditor Should Analyze It?
The Stock actually represents a tangible type of property that can be held for
- Vending in the normal business course,
- During the course of making for such a sale,
- Or even for use in the manufacture of goods.
Learn more on the stock verification policies
Stock verification includes the physical counting and the all-around measuring of the stock items so as to confirm the real quantity of the stock to be considered for the stock evaluation.
However, this task is considered difficult than other any assets of the same criteria mainly due to the following reasons.
- The stock details may vary frequently and this represents the major current asset of the business company.
- Moreover, there exist different methods for pricing of the different stock-in-trade.
- Further, the value of these stock assets is directly associated with the sales and income of the year.
- In addition, these are always open to the risk of manipulation or fraud representations.
The main objectives of stock-in-trade corroboration include
- Determining the true profit and loss that is made during the year of accounting.
- The elevation of the True and Fair financial status of the business organization.
- Formulating out the statements that represent the claim for stock loss occurred due to fire, flood and so on.
- The valuation of the price of the stock on consignment is another major agenda.
- Apart from this, identifying the true value of the stock that is kept on sale or return also needs to be evaluated.
- Also, to establish the title of the stock requires to be considered.
- It has to be taken care that the stock is totally free from any kind of charges or any other liabilities.
An Auditor’s role regarding the stock verification
The profit and loss account of a business process is truly based on the way the stock is being evaluated and the extent of accuracy is dependent on the fair recordings made on these assets during the closing section. This duty of verification is entrusted with the Auditor only. Further, the Auditor performs responsibilities like
- Assuring if the stock-taking method is correct based on his personal valuation criteria.
- Also, he confirms the stock-sheets with respect to a good internal checking system. For example, there can be additions or price extensions on the different stock under certification. The managing director approves it off and later, the Auditor cross-check this with the record book.