Inventory audit checklist for warehouses and branches

An inventory audit confirms that the stock in your records exists, belongs to the company, is complete and is valued correctly. It can be a year-end physical count observed by external auditors, an internal audit of a branch, or a surprise spot audit. This checklist covers all three, organized by stage, for Philippine companies with warehouses and branches.

Before the count

Planning

• Count date, locations and scope agreed with management and auditors
• Count teams assigned: counters, checkers and supervisors, with at least one person independent of the location
• Count instructions written and briefed (units of measure, damaged goods, consigned items)
• Count sheets or devices prepared, with blind counting (no system quantities shown)

Location preparation

• Areas organized; like items stored together and labeled
• Damaged, expired and obsolete items segregated and tagged
• Goods held for customers or belonging to suppliers (consignment) identified and excluded or listed separately
• Pending receipts, transfers and deliveries processed or clearly separated

Cutoff

• Last receiving document number recorded
• Last delivery and transfer document numbers recorded
• No movements during the count, or movements controlled and documented

During the count

• Count in teams of two: one counts, one records, or one counts and another verifies
• Every location counted and marked as counted
• Counts recorded in the item's base unit of measure
• Damaged and expired items counted separately with condition noted
• Supervisors perform test counts: sample items from records to floor, and from floor to records
• Count sheets signed and controlled; no blank or missing sheets

After the count

Variance analysis

• Count results compared with system quantities
• Variances above tolerance recounted
• Remaining variances investigated: unrecorded receipts, transfers in transit, sales not posted, unit of measure errors
• Root causes documented

Adjustments

• Adjustments approved according to value limits
• Adjustments posted with reference to the count
• Inventory value reconciled to the general ledger after adjustments

Valuation

• Cost method applied consistently (inventory valuation)
• Slow-moving, damaged and expired items reviewed for write-down to net realizable value
• Consigned goods excluded from inventory value

Reporting

• Audit report with variance by location, category and value
• Shrinkage rate computed (shrinkage guide)
• Action plan with owners and dates

Spot audits at branches

Unannounced spot audits of a small sample of high-value or high-risk items keep branches honest between full counts. Choose items based on past variances, theft risk and value. Results should go to both the branch manager and head office.

Red flags during an audit

• Count sheets with corrections and no initials
• Boxes counted as full without opening
• Large positive adjustments just before the count
• Items that can't be found but are "with another branch"
• Store staff insisting on counting their own high-value items without verification

Year-round accuracy

An annual audit catches problems late. Combine it with cycle counting (cycle counting guide) so errors are found while they are recent, and with controlled stock transfers and receiving.

Where Cirquolus fits

Cirquolus Inventory & asset audit supports goods audits, asset verification, spot audits and product movement and materials reports, bringing discrepancies into a structured review across operating locations. It connects to inventory management for adjustments and valuation.

Frequently asked questions

What is an inventory audit?

A review that verifies inventory records against physical stock and checks valuation, cutoff and ownership.

How often should inventory be audited?

At least annually for financial reporting, with cycle counts and spot audits throughout the year.

Who should count inventory?

Teams that include people independent of the location, supervised, with test counts by an auditor or reviewer.

What is cutoff in an inventory count?

Making sure receipts, transfers and sales are recorded in the correct period, so counted stock and records cover the same transactions.