An inventory audit service in UAE involves inspecting inventory and comparing it to the company records or books. The process also includes a review of financial records. An inventory count audit may appear to be a simple procedure, but in reality, it is quite complicated.
Auditing is a necessary procedure that all organizations, especially medium and large companies, must go through. It aids in determining the current value of company assets, particularly inventory. The audit will also show where the business can improve and how it can optimize the process.
10 Stages of Inventory Audit Service in UAE
Auditing inventory can be a lengthy but beneficial procedure. It involves the following stages:
Step 1: Evaluation of the physical inventory count
In order to familiarize with the existing procedure of the business for counting physical inventory, an audit firm in Dubai will discuss with the management the counting procedure, observe how ‘live counts’ are done, do the counting of the inventory, cross-check counts with amounts that are in the records, and ensure all count tags for inventory are accounted for. Asset tags or count tags are attached to inventories and other assets which give real-time information on inventory availability.
There are instances wherein a business has several inventory locations. In such cases, auditors will check locations that have significant inventory levels.
Step 2: Thorough review of the item costs
The second stage of an inventory management audit service in UAE is the auditors comparing amounts in the most recent invoices from suppliers against costs which are in the company’s inventory valuation reports. The goal is to determine where purchase items in the organization’s accounting records originate from.
Step 3: Analysis of the overhead costs
If the overhead costs are applied to the inventory valuation, an auditing firm in Dubai conducting the inventory audit will verify whether or not the same exact general ledger accounts are used consistently as the source of the overhead costs. The auditors will also check whether or not the overhead costs include abnormal or unusual costs and if the recording of overhead costs is done consistently.
Step 4: Review the ownership of inventory
During an inventory audit conducted by internal or external auditors in Dubai, purchase records will be checked to ensure the inventory within a warehouse is in fact owned by the organization. It is possible that the inventory may be on consignment or owned by the customer.
Step 5: An audit of all high-value items
There may be items in an inventory with an unusually high value. In such a case, auditors will count each high-value item in the inventory. The counting and evaluation will be to ensure the value is accurate and the valuation reports are correct in relation to the items.
Step 6: Evaluation of the finished goods cost
This is when the internal or external auditors in Dubai review the company’s bill of materials that’s for a select batch of finished goods items. It is then tested to see if it shows a correct compilation with accurate costs on components in the batch of finished goods.
Step 7: The cutoff analysis
The auditors will then analyze how the organization handles the exemption of the possible extraneous items in the inventory. This is done by checking the last shipping and receiving transactions which occurred prior to and following the physical inventory count.
Step 8: Checking of inventory in transit
If some of the inventory of the company is still in transit and in between locations, auditors will want to review the transfer documents during the fieldwork for inventory audit service.
Step 9: Review inventory allowances.
Auditing firms in Dubai will define the relevance of amounts which have been recorded by the management as the allowances for scrapped or obsolete inventory based on reports and historical patterns.
Step 10: Checking the inventory layers’ validity
In case the organization is using the FIFO or LIFO method for inventory valuation, the auditors will review the inventory layers which have been recorded in order to verify their accuracy and validity.
Inventory Audit Service in UAE
Compliance is a constant concern for organizations. The inability to meet industry standards, rules, and regulations will likely result in fines and penalties. In Dubai and the rest of the UAE, businesses are required to have updated records. An inventory audit in Dubai, UAE will help in determining compliance issues and aid in rectifying records to avoid penalties.
It’s also important to note that not all inventory audit services are the same. It’s advised to seek only the expert assistance and guidance of seasoned auditors to help mitigate inaccurate counts, potential employee theft, and inefficient audits. Our auditors are the industry experts who can help deliver a qualified audit opinion on inventory and allow the inventory auditing procedure of your company to be as easy and streamlined as possible. Call us today!
Kasun Liyanage is an Audit Manager with over 7 years of experience dealing with diversified corporate clients. He not only manages the team’s work schedule but also is an expert in handling audit areas such as external audits and fraud investigation, Internal control benchmarking and best practices and well as preparation of financial statements and IFRS compliance.