10 Jan 2022 Ankit Chadha

The Need for Physical Stock Verification And The Methods Used

Physical Stock Verification | TRC Corporate Consulting

One of the most important audits for a business to establish is its assets. Physical stock verification of assets is a process conducted by auditors to ensure that the assets of a business exist. In any business, its assets are essential as they represent that organization's financial condition and position in the market. Thus, the physical assets of any business also act as a plan B in case the company has to or decides to dissolve. These assets can be sold to clear debts and reconcile the pending bills (if any).

Physical stock verification or stock audit includes counting, calculating and weighing all items in stock. Now that you know what is stock audit, it is essential for you to understand the objective of physical stock verification.

The Objectives of Physical Verification of Assets:

  • It is legal compliance that organizations need to comply with
  • It ensures the existence of assets of an entity
  • Enables valuation and rectification for any accounting inconsistency
  • To oversee internal compliances of the entity
  • It is essential in order to maintain continuous customer service

Physical verification of stock audit requires an objective assessment of ledger contents and internal controls that support asset management. Thus, the physical stock verification process includes:

  • Comparing and documenting the asset tags and their serial numbers.
  • Manual evaluation of manufacturer model numbers.
  • The auditors compare the additional available information such as description, location and department and take them into consideration.
  • The process consists of a rigorous attempt to address the potential matches by description, manufacturer, model and serial number that may be documented elsewhere in each record entry.
  • Distribution of bulk entries and grouped assets to the individual assets (computer equipment, fixtures, manufacturing equipment, etc.)
  • Follow-up visits if required to confirm any residual assets and/or collect additional information.
  • Most importantly, the process includes setting up an audit trail for linking the reconciled inventory file with the current fixed asset accounting records.

What are the Benefits of Physical Stock Verification & Reconciliation Services? 

  • It provides support to the value of stock shown in the balance sheet through physical verification
  • It verifies the accuracy of stock records
  • Helps in disclosing the possibility of fraudulent activity, theft or loss, or depreciation
  • To identify and address the weakness of the system, if any (i.e., whether the stock is in safe custody).

All businesses need to carry out the extensive physical verification of stock audit at the end of every financial year. The physical stock verification process conducts a line-by-line reconciliation of stock assets accounting records to assets found during the physical inventory taking process.

At TRC Corporate Consulting, we have a team of skilled consultants and supervisors who work by combining modern techniques and traditional values of physical stock verification to serve you by providing excellent business advice and solutions.

Methods of Stock Verification

There are three main methods of conducting physical stock verification, and they are as follows:

1. Periodic verification: This method is opted by small or establishing organizations as, under this method, the whole of the stock or all the assets verification is covered and processed together at the end of a financial year. The reason this is done only in small organizations is that small organizations have fewer assets as compared to large firms. Besides, the periodic verification method is not suitable for big industrial organizations since to complete work for several days to conduct the physical stock verification process.

2. Perpetual verification: Apart from all the other methods of stock verification, under this method, physical stock verification is stretched throughout the year according to a preset programme. And each item is physically assessed at least once a year.


The perpetual verification process has the following four advantages that you must know of:

  • The best part about this verification method is that neither the stores nor the employees have to stop or pause their day-to-functions.
  • The usual store transaction and posting can continue without any hindrance.
  • Excesses and shortages arising from time to time can be written-off after proper assessment during this verification process.
  • This method enables all the verifications to happen on a timely basis.

3. Blind verification: When the stock verifiers have only given the location but not other details such as the code numbers, description and stock record balances, thus, the basic logic here is that the verifier will not have his opinion about the stock position, and he only has to mention the exact same figures in the record without actually verifying the stocks.

This is not one of the most popular methods of stock verification since it practically serves no purpose when the entire operation of stores has to be well-planned.

TRC's Practices of Accounting Standards Related to Verification of Assets

At TRC Corporate Consulting, we follow all the Accounting Standards (AS) as per their relevancy to fixed-assets' accounting needs, inclusive of the physical verification of fixed-assets as our FAMS practices. 

Along with that, our team of FAMS Specialists can help you with:

  • Consolidation of all the physical reports for all locations, assets or inventories
  • Implement reconciliation procedures and match the records of physical and book count
  • Assess the difference, if any, and identify the justifications
  • Deliver Expert Physical Verification Reports

At the closure of the physical verification stock assets, we also provide an audit trail formulated on a spreadsheet, alongside several other specific reconciliation documents such as:

  • Matched Assets
  • Unrecorded Additions
  • Unrecorded Retirements

If you have any more questions about our physical stock verification process or need further understanding about our services, contact us!

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