In simple words, the stock audit means physical verification of inventory; it may also involve the valuation of inventory depending upon the terms of reference. An inventory audit is considered a generally accepted auditing procedure. Stock Audit or Inventory check” is a physical verification of quantities and conditions of items held in the warehouse. The reason behind this check is to know the position of existing stock and is independently checked.
In legal reference, a Stock audit is a statutory process which every business entity is required to perform at least once in a Financial Year. The stock audit process mainly involves the counting of physical stock present in the specified premises and verifying the same with computed stock as maintained by the company. The intention and purpose behind executing this is to rectify the discrepancies present in the booked stock when compared to physical stock by passing necessary adjustment entries.