Establishing an audit of assets is a crucial undertaking for any business. Assets serve as a fundamental representation of an organization’s financial health and standing in the market, acting as a contingency plan should the need to dissolve arise. Physical stock verification, or stock audit, involves the meticulous process of counting, calculating, and weighing all items in stock.
Objectives of Physical Verification of Assets:
1. Legal Compliance: Ensuring adherence to legal requirements.
2. Existence of Assets: Confirming the presence of an entity’s assets.
3. Valuation and Rectification: Enabling valuation and addressing accounting inconsistencies.
4. Internal Compliance Oversight: Overseeing internal compliance of the entity.
5. Continuous Customer Service: Essential for maintaining continuous customer service.
The physical stock verification process includes:
Comparing and documenting asset tags and serial numbers.
Manual evaluation of manufacturer model numbers.
Considering additional information like description, location, and department.
Rigorous attempts to address potential matches by description, manufacturer, model, and serial number.
Distribution of bulk entries and grouped assets to individual assets (e.g., computer equipment, fixtures, manufacturing equipment).
Follow-up visits if required to confirm residual assets or collect additional information.
Benefits of Physical Stock Verification and Reconciliation Services:
1. Support for the Balance Sheet: Validates the stock value in the balance sheet through physical verification.
2. Accuracy of Stock Records: Verifies the accuracy of stock records.
3. Fraudulent Activity Disclosure: Helps disclose the possibility of fraudulent activity, theft, loss, or depreciation.
4. System Weakness Identification: identifies and addresses weaknesses in the system, ensuring the safe custody of stock.
Methods of Stock Verification:
1. Periodic Verification: Covers the entire stock or all asset verification processed at the end of a financial year.
2. Perpetual Verification: Stretches physical stock verification throughout the year according to a preset program, allowing timely verifications.
3. Blind Verification: Verifiers are given only the location without details like code numbers and descriptions, making it a popular method.
CUSH’s Practices of Accounting Standards Related to Verification of Assets:
CUSH Consults adheres to all relevant Accounting Standards (AS) for fixed-assets accounting needs, including physical verification of fixed assets in its FAMS practices.
FAMS specialists at CUSH Consults can assist with:
Consolidation of physical reports for all locations, assets, or inventories.
Implementation of reconciliation procedures to match physical and book counts.
Assessment of differences and identification of justifications.
Delivery of expert physical verification reports.
After the physical verification of stock assets, CUSH Consults provides an audit trail formulated on a spreadsheet, along with specific reconciliation documents like matched assets, unrecorded additions, and unrecorded retirements. If you have further questions or need understanding about our services, feel free to contact us!