Physical stock verification

Originally posted by : palak gupta
	What activities are to be performed and steps to be taken while conducting physical stock verification? Please reply as soon as possible.

There are two types of physical stocktaking - Continuous Stocktaking and Periodic Stocktaking.
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First of all, a program should be drawn up and agreed with all concerned, including the customer's finance department, auditors, the customer's management and warehouse personnel.
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Secondly, proper cut off time, inventory report, stocktaking sheets or cards have to be prepared in advance.
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Thirdly, all personnel concerned must be instructed and briefed before-hand on their respective duties come the day of the stock take.
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Overview of the procedure:
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-> Appoint one person to control the whole operation.
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-> While stocktaking is in progress, do not have the warehouse open for normal business or operations.
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-> After the end of the last working day before the stocktake, no more issues (deliveries) should be made and no more receipts recorded into the Warehouse Management System until the stocktake is complete.
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-> The number of the last receipt and issue should be noted, and all documents up to and including these numbers posted to the computer system or records. At this point, all the records can be ruled off and no further postings are made until the results of the stocktaking have been entered.
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-> Each row of racks in the warehouse should be numbered and the number marked in chalk on the floor. Each bay in the racking should be numbered to enable easy recounting if necessary.
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-> Count sheets should be issued to the staff doing the stocktake. Count sheets should be carbonized with minimum three copies. One copy for the client, one copy for the warehouse operator and one copy for the master file as backup.
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-> Have stocktaking sheets under the control of one person, consecutively numbered, and issued to the staff on duty as required. No duplicates should be allowed and at the end of the job, all stocktaking sheets must be accounted for.
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-> There should be count teams assembled on the day of the stocktake. Each team should consist of a forklift driver, a representative from the client and a representative from warehouse operator.
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-> The number of items in each bay should be counted. The count sheet for each bay should be countersigned by the client's representative and warehouse operator's representative. The object is to make each person taking stock responsible for a particular section or clearly defined area of the warehouse and record everything that is found in the area.
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-> Count all normal stock including loose packages and items under inspection. Damaged stocks should be recorded separately.
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-> After the teams have completed their counts and handed the count sheets to the verifiers, the results of the count sheets should be entered into a computer and verified on the spot. The number of total items in the count and in the system should be compared to see if there are any shortages.
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-> If the number of items counted matches but there is a difference in individual models, there may have been cross counting or cross delivery of stock. If the number items does not match or there is a large discrepancy, then the items which show large discrepancy have to be recounted immediately. This is where the numbered bays and allocated count sheets will be very useful as this will enable the count team to zoom in on the area where the goods for which there is discrepancy are kept.
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-- Extracts from ICAI Internal Audit Compendium.

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