Physical stock verification - specific instructions

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Anil (Querist)
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11 August 2008 This query was posted few days back but strangely it disappeared shortly after posting(after the site was down for maintainance). Here is the question again:

What are the specific instructions to be issued to the client BEFORE taking up the physical verification of stock by the auditor?

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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18 August 2008 The following instructions may be given before carrying out the exercise of physical verification:

1. Locationwise - itemwise lists of stocks may be obtained.
2. Purchses not recognised should be earmarked separately.
3. Stock sold but pending for delivery should be identified and kept separately.
4. Routine stocks should be issued in advance in the production/ workshop so that the production process is not hampered.
5. The movement of stock during the exercise should be restricted to the bare necessary requirement.
6. Old, obsolete and slow moving stocks should be identified separately.
7. Stocks issued or received on approval should be listed so as to adjust the list of stock in hand accurately. These should be supported by copies of challans with proper receiving by the parties concerned.
8. All challans, bills etc should be readily available which may be ticked with the stock register and books of accounts.