Stock audits and defined special-purpose reviews
Audit and assurance
·
On demand
Stock reported to a lender must be supported by more than a total from the inventory ledger. Ownership, condition, location, valuation and the lender’s eligibility rules can all affect what belongs in the statement and what supports the borrowing limit.
TheTaxCo undertakes stock audits and defined reviews subject to the appointing party’s requirements, professional eligibility and an agreed scope. An engagement may examine inventory, receivables, creditor information and a drawing-power calculation. The appointment letter determines the coverage and report format.
Agree the locations, date and purpose
We establish who is appointing the reviewer, who will use the report, the relevant stock date, locations and records. A lender’s prescribed format is obtained before the work is planned. If physical verification is required, access, count arrangements and stock movements during the visit need to be agreed.
An owner-led stock review may have a different objective from a bank-appointed audit. Likewise, a special-purpose review is not automatically a statutory tax audit or another legally prescribed engagement. The actual requirement must be identified before accepting the assignment.
Uncertainty about coverage is addressed at scoping. It is not treated as an exemption from a lender’s request or a reason to ignore a discrepancy.
Reconcile physical stock with the records
The procedures may include observing or testing a count, comparing items with stock records, examining selected purchase and dispatch documents, and reconciling quantities and values to the accounts. Coverage is documented by location, category and date.
Where the visit date differs from the reporting date, movements between those dates must be considered. Purchases received, goods dispatched, production, returns and transfers can change the stock position. A count taken today cannot simply be described as stock held at an earlier date.
Ownership also needs attention. Goods belonging to customers or suppliers, stock held on consignment, material at job workers and goods in transit may require different treatment. Physical presence alone does not establish ownership, and ownership alone does not establish eligibility under a lender’s terms.
Examine quality, value and borrowing eligibility
Slow-moving, damaged, obsolete or disputed stock may need separate identification. We examine the stated valuation basis and supporting records within scope. A quantity reconciliation does not resolve whether the recorded value is supportable.
Area | Matters the agreed review may cover |
|---|---|
Inventory | Ownership, quantity, location, condition, ageing, valuation and reconciliation differences |
Receivables | Ageing, subsequent receipts, disputes, credit notes, related-party balances and the lender’s eligibility conditions |
Creditors and unpaid stock | Amounts that affect the lender’s specified calculation and supporting reconciliation |
Drawing power | Eligible amounts, deductions and margins under the actual sanction terms |
Reporting | Agreement between books, statements submitted and the prescribed report schedules |
A sanctioned limit and available drawing power are different. The calculation must follow the relevant facility terms, including eligible assets, deductions and margins. We do not substitute a universal percentage or debtor-age limit for the bank’s requirements.
Illustrative issue: goods may be present and recorded correctly but remain unpaid to the supplier. Whether and how that affects drawing power depends on the sanction conditions. The report should identify the facts and the treatment used in that calculation.
The report and unresolved differences
The agreed deliverable records the procedures performed, coverage, reconciliations, findings and limitations. Material differences are supported by a schedule that shows the records compared and the explanation obtained. An unsupported management explanation remains an unresolved matter.
Recommendations can address record maintenance, count controls and recurring reconciliation problems. Where the lender prescribes direct reporting, the appointment determines the authorised reporting route. The borrower should not assume it can require adverse findings to be removed.
Where the findings call for a repeat count, additional location visit or review of corrected statements, our team plans and completes the required follow-up. The initial report does not imply continuous monitoring of stock movements after the review date.
Documents and practical arrangements
The detailed checklist may include the appointment and sanction letters, recent stock statements, inventory and receivable ledgers, ageing reports, creditor details, valuation workings, relevant invoices and movement records. Warehouse access and the availability of staff who can explain the records affect the schedule.
Preparation time depends on the locations, volume and quality of records, whether the counts are complete and the extent of reconciliation needed. A report cannot be responsibly finalised merely because a submission date is approaching if essential evidence is missing.
Can you use a stock count performed by our staff?
The approach depends on the appointment and evidence required. We may need to examine count controls, perform selected verification or undertake other agreed procedures. An internal count sheet alone does not determine the conclusion.
Does a stock audit guarantee that the bank will increase the limit?
No. The report addresses its agreed purpose and findings. The bank makes its own credit and facility decisions.
What if the requirement only says “special audit”?
Provide the exact letter or instruction. The purpose, authority, qualification requirement and report wording must be identified before the appropriate expert and procedures are assigned.
For a facility application or renewal, see bank finance support. Email TheTaxCo, message us on WhatsApp or book a call. Share the appointing party, reporting date, locations and requested report format.