Inventory

Reporting requirement

Report whether (a) inventory has been physically verified by the management at reasonable intervals; whether material discrepancies (10% or more in the aggregate) were noticed and properly dealt with in the books; (b) the company has been sanctioned working capital limits in excess of ₹5 crore from banks/FIs on security of current assets, and whether quarterly returns / statements filed with such banks/FIs are in agreement with the books.

What to verify before signing

• Physical inventory plan (cycle counts vs full count) coverage and supervisor sign-off
• Reconciliation between physical and book inventory; 10% threshold check
• Working capital sanction limit aggregation — banks/FIs combined ≥ ₹5 cr
• Quarterly stock + debtor statements filed with the bank; agreement with audited books

Sample observation — applicable

(a) The inventory has been physically verified by the management during the year. In our opinion, the coverage and procedure of such verification by the management is appropriate. No material discrepancies were noticed on physical verification of inventory as compared to the book records. (b) The Company has been sanctioned working capital limits in excess of ₹5 crore, in aggregate, from banks on the basis of security of current assets. The quarterly returns / statements filed by the Company with such banks are in agreement with the unaudited books of account of the Company.

Related standards