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Query on physical stock take of a firm

11 April 2014

Does the auditor have the right to carry physical inspection of the stock during BUSINESS HOURS by closing the shutter ? My client is refusing in a manner that auditor has no such right.. Can you help giving me a reply as regards to which part of the guidance note or standards it had mentioned..

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8 Replies

vaibhav (student) (253 Points)
Replied 11 April 2014

Internal auditor may take physical stock verification to ascertain 31.3.14 actual stock. In advance they may give instruction not to receive/issue stock for 1-2 days by mutual discussion of auditor and client. But they may not be so hard as explained by you. Statutory auditor will rely upon internal auditor's opinion and may take sample based physical stock verification.

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Anoosh Mohamed (maas) (30 Points)
Replied 11 April 2014

Thanks vaibhav. Actually the scenario is when i expressed my intention to inspect the stock..He was like its business hour.You dont have the right to carry out the inspection during business hour.I said we do have the right.And now he want to see such a written right in the guidance note/rule/act

CA Deepesh Ruhela (Keen to Learn) (3271 Points)
Replied 11 April 2014

No, he can't deny but for this you can ask for MRL and having regard the circumstance due to which they refused to conduct verification in bussiness hours, decide further procedure. If it is not possible to conduct verification, do it after buisness hours.

Anoosh Mohamed (maas) (30 Points)
Replied 11 April 2014

Auditor's right to inspect the stock during business hours,how can i show him such a right exists even though he have no right to deny. I checked guidance note.No where it mentions.

Deepu (B.Tech) (57 Points)
Replied 12 April 2014

This is ios testing

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Anoosh Mohamed (maas) (30 Points)
Replied 12 April 2014

Can u explain please ?

Vivek Khakhkhar (Assistant Audit Manager) (201 Points)
Replied 12 April 2014

you can refer to rights of an auditor. there is no need to go specific for inspection of stock physically. Auditor can have access to any data during reporting period. If management denies it is limitation on scope of audit. You can disclose in report.