How do you document and report the inventory audit results and findings?

1 Prepare for the audit

Before you start the audit, you need to plan and prepare for it. This includes defining the scope, objectives, and criteria of the audit, selecting the audit method and frequency, and gathering the necessary documents and tools. You also need to communicate with the relevant staff, stakeholders, and external auditors, and inform them of the audit schedule, expectations, and responsibilities.

2 Count the inventory

The next step is to count the inventory, either manually or electronically, depending on the audit method you chose. You can use different techniques, such as cycle counting, wall-to-wall counting, or sampling, to count the inventory items in different locations, categories, or batches. You should follow the inventory procedures and guidelines, and use the inventory records and documents, such as invoices, receipts, or purchase orders, to verify the quantity and value of the inventory.

3 Inspect the inventory

After counting the inventory, you should inspect the quality and condition of the inventory items. You should check for any damages, defects, obsolescence, or expiration of the inventory, and record any issues or discrepancies. You should also verify the compliance of the inventory with the relevant standards, regulations, or policies, such as safety, quality, or environmental requirements. You should document any non-conformities or deviations, and recommend any corrective or preventive actions.

4 Reconcile the inventory

The next step is to reconcile the inventory, which means to compare the physical inventory count and inspection results with the inventory records and documents, such as the inventory ledger, the general ledger, or the financial statements. You should identify and explain any differences or variances, and adjust the inventory records and documents accordingly. You should also review the inventory valuation and costing methods, and ensure that they are consistent and accurate.

5 Document the audit

The final step is to document the audit, which means to prepare and present the audit report and findings. The audit report should summarize the audit objectives, scope, method, results, and conclusions, and highlight any issues, discrepancies, or recommendations. The audit report should also include the audit evidence, such as the inventory count sheets, inspection records, reconciliation statements, or adjustment entries. You should follow the audit standards and formats, and use clear and concise language.

6 Report the audit

The last step is to report the audit, which means to communicate and share the audit report and findings with the relevant staff, stakeholders, and external auditors. You should explain the audit process, results, and implications, and answer any questions or concerns. You should also discuss any actions or improvements that need to be taken, and follow up on the implementation and effectiveness of the audit recommendations. You should maintain the audit records and documents, and update the inventory policies and procedures as needed.