Common irregularities / observations in stock audit

The common irregularities that may be observed by the CA firm during stock audit can be summarized as follows

Observations about statement submission & Scrutiny Stock Book Debts statements not submitted / not submitted in time.

Observations about account operations

Observations about Insurance coverage

Operations in the Under insurance accounts not scrutinized of stock. with reference to projections, QIS statements, audited accounts etc. Defects pointed out Insurance expired by the Internal and not renewed. Auditors / Inspectors / Concurrent Auditors are not complied with.

Inadequate details viz. rate, quantity and amount of different type of stock items not stated in the statement.

Scrutiny of stock statements not done.

No / belated Premium for review / renewal of A/c. renewal policy paid but policy not on record. All sales as per Insurance Policy financial statements not without Bank Clause. routed through account. No coverage of all risks as per sanction.

DP Register not written up to date.

Age wise analysis of Debtors Account not not given / done. Debtors over 90 operated actively. days (or as per sanction) considered for drawing power.

Drawing power not correctly calculated. Latest visit report by branch official not on record.

Cash withdrawal Wrong items / during current period is description of goods abnormal. on insurance policy. Frequent overdrawing in the account. Location of goods wrongly stated.

 Balance over All locations of drawing power although stock not covered. within Sanctioned Limit.

Observations about Observations about verification of General Observations verification of stock and Sundry Debtors creditors Stock book not Existence of long pending maintained/ not updated. debtors. Diversion of funds and inter account transfers are not properly monitored.

Obsolete stock not excluded from stock figures submitted to bank.

Long pending debtors shown Borrower having operations as below 90 days debts to bank. with other bank for which permission of lender not obtained. Bank name plate not displayed.

Deteriorating stock Increase in the average turnover ratio. collection period of debtors. Stock figures Dispute with debtors and submitted at the year end pending court cases. and as per financial statement not matching. Stock debtors as per Amount receivable from statements submitted and Sister concern considered for as per books not calculation of drawing power. matching. Confirmation for Advances received from inventory with third party debtors not reported resulting into not obtained or physical lower DP than calculated by bank. verification of Inventory not done. Material received from third parties for job work not excluded while calculating drawing power.