S TOCK & B OOK D EBTS A UDIT Prepared by – CA Gokul B. Rathi 1.
27
STOCK & BOOK DEBTS AUDIT Prepared by – CA Gokul B. Rathi 1
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Transcript of S TOCK & B OOK D EBTS A UDIT Prepared by – CA Gokul B. Rathi 1.
STOCK & BOOK DEBTS AUDITPrepared by –
CA Gokul B. Rathi
1
COMMUNICATION WITH THE BORROWER –
M/s. ---------------------------- dated
------------------------------
__________________
Sub. : Stock & Receivable Audit of ____________________ .
Kind Attention : Mr. ________ (DF/G.M. – Accounts & Finance of the Company).
Sir,
This is with reference to _______________ Bank letter No. _________________ dated ________________ regarding Stock Audit of the Company. You are requested to provide the following information/ details so that the stock audit can be commenced at the earliest :
2
REQUIREMENTS –
Copy of Stock Statement submitted to the Bank as on the last day of the previous month.
Statement of stock with sub contractors, if any List of Debtors as on the last day of the previous month with bifurcation of
Debtors below 90 days and above 90 days. List of Creditors as on the last day of the previous month – with bifurcation
as Creditors for Capital goods, Creditors for Raw Material, for expenses, etc.
Copy of Tentative / Audited Balance Sheet as on 31/03/13 List of Advances from Customers as on the last day of the previous month.
List of Statutory Dues pending till date
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REQUIREMENTS – List of A/cs with other banks with their present balances
List of Fixed Assets List of Unsecured Loans List of Obsolete/ Non moving/slow moving Stock as on the last day of the
previous month. Details of method of valuation of different items of stock such as
RM/WIP/FG, etc. Copies of insurance policies obtained. Copy of the latest sanction letter. 4
BORROWERS’ PROFILE -
NAME OF BORROWER
NATURE OF BUSINES
TYPE OF INDUSTRY
MAIN PRODUCTS
ACCOUNT AT (BRANCH / ZONE)
CONSTITUTION
FULL ADDRESS – OFFICE
FULL ADDRESS – FACTORY
FULL ADDRESS – GODOWN 5
BORROWERS’ PROFILE
CREDIT RATING (MARKS/ CATEGORY)
STATUS
DATE OF LAST INSPECTION
DATE OF CURRENT INSPECTION
INSPECTION BY
PERSON CONTACTED (MET AT SITE)
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GIST OF MAJOR OBSERVATIONS
Reconciliation of the stock statements submitted to Bank by the Company with their accounting records.
Physical Verification of Stocks, excluding obsolete/ damaged / defective goods, covering 100% of high value items, 50% to 75% of medium value items and 10-20% of low value items.
Valuation of Inventory at the cost price or market price
whichever is lower indicates both the cost and market price with comments on weighted average purchase price of main raw material.
7
GIST OF MAJOR OBSERVATIONS
Condition and location of storage, godown – whether open or covered, owned or rented. Verifying items in transit/lying with third parties/ on consignment basis/ with processing houses/ customers warehouses.
Age, quality, holding levels and method of valuation of different items of
Inventory. Also Comparison with the Audited Balance Sheet as on 31st March, ……….
Inventory management and control policies, method of procurement,
maintenance of records of issue and receipt of stock. Souring of Raw Material and credit available. Proportion of Cash and credit sale and average period of credit. Extent of purchases made from the sister/ allied concerns and its genuineness.
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GIST OF MAJOR OBSERVATIONS
Age-wise and value-wise verification and evaluation of debtors / Receivables . Reasons for non-collection of long standing debts, if any.
Verification and evaluation of Sundry Creditors relating to stocks and
other creditors. Verification & Correctness of registration/ modification of Bank’s
charge with ROC. Sufficiency and currency of Insurance policies and risk covered.
General attitude of Promoters/ staff for safety of stock and recoveries of receivables. 9
GIST OF MAJOR OBSERVATIONS
Comments on overdue statutory liabilities.
Comments on demand/ supply and market for products of the Company.
Comments on maintenance of Excise Record in tune with Stock Record
Examination of Shareholding Patterns etc.
Verification of A/c Statement to ascertain any diversion of funds
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FACILITIES ENJOYED
Type of Facility Sanctioned Limit
Ruling Limit O/s. Bal. as on Overdue
Cash Credit
Bill Discounting
Packing Credit
Term Loans: -
TOTAL FUNDED
Letter Of Credit
TOTAL NON- FUNDED
GRAND TOTAL
Whether consortium a/c. Name of Lead Bank
% of our Bank’s Share
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SECURITY POSITION
Particulars Value as on---Rs.
Basis Perm. Limit Rs.
O/s. Bal. as on Rs.
Stock
Debtors < 90 days
Debtors > 90 but < 120 days(subject to margin)
Total
Tools, Dies, etc.
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CALCULATION OF DRAWING POWER AS ON ____________
Particulars As per Stock Statement of Co.
As per Physical Verification
Stock
Less: Outstanding LC for RM
Stock as on ------------------
Debtors below 90 days
Total
Less: Trade Creditors / Advances from Customers
Less: - Margin @ 30%
Add: Debtors between 90-120 days considering margin of 50% (if any)
Allowable DP
Balance as on
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COLLATERAL SECURITY –
Particular(Give brief particulars where
situated)
Area Market Value Rs Lacs
Charge created for
Rs Lacs
% to total facilities
Property
Machinery
Others – FD, etc.
14
INSURANCE & OTHER DETAILS–
Details of Insurance:
Policy no. Name of Unit
Assets insured
Sum insured Risk covered
Expiring on
a) Main Suppliers:
b) Main Customers:
15
METHOD OF VALUATION OF STOCK –
a) Method of Valuation: Stock as on
Stock Method of Valuation
Value Rs. in Lacs
Raw Material
WIP (Semi Finished)
Finished Goods
Notes –
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STOCK RECORDSSr. No. Particulars Remarks
1 Whether Stock records are maintained up-to-date?
2 Whether the proper records of material sent out for processing and received back are maintained?
3 Whether the records maintained permit tracking down the movement of stock?
4 % of consumption of Raw Material to Sales
5 % of Wastage in process
6 Whether reconciliation between RM and production is done?
7 Whether the record of finished goods matches with that of the excise record?
8 % of Stores & consumables to RM Consumption
9 Whether proper costing system of various types of stocks is in place?
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STOCK RECORDS
Sr. No.
Particulars Remarks
10 Whether amount of excise duty is added-up in Finished Goods? If yes, what is that amount so added-up?
11 % of slow moving, obsolete stocks & rejected stocks. Also give details of major items under above categories.
12 Whether such stocks are shown in the Stock Statement/s submitted to the Bank?
13 Whether a system for verification of various types of stocks at periodical intervals is in place?
14 Irregularities observed in physical verification of various types of stock.
15 Whether overstocking under any category is observed?(Give comments as to the general norms of stock level for the concerned industry)
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STOCK RECORDSSr. No.
Particulars Remarks
16 Whether the material received for processing from clients is stated in stock statement/s submitted to the Bank? If yes, what is that amount?
17 Any irregularity observed thereby the Drawing Power allowed by the concerned Branch on the basis of the stock statement is more than the actual Drawing Power.
18 Whether segregation of stock as stipulated by the Bank is maintained?(Stocks under LC, Regular Stocks etc.)
19 Physical verification of various types of Stocks:(Give brief comments)
Raw Materials, Finished Goods / Stores & Spares:
Work – in –process:Whether the system for carrying our ABC analysis is in place? 19
STOCK RECORDS
Sr. No. Particulars Remarks
20 Give brief comments on the nature of stock-
a) Whether special care is required to be taken for storage?
b) Whether Raw Material/s is/are easily available?
c) Whether easily marketable?
d) Whether stocks stored are exposed to any type of risk?
Details of Slow/Non Moving Stock -
Sr. No. Particulars Quantity(Kgs)
Value Rs.
A) Finished Goods
B) Raw Material20
RECORD OF BOOK DEBTS –
Sr. No.
Particulars Remarks
1 Whether proper records of Book Debts are maintained?
2 Whether the book debts represent only the sale of Finished Goods? If no, then what it includes?
3 Whether a system to generate age-wise, party-wise book debts is in place?
4 Whether the records of book debts maintained age-wise, party-wise are matching with that submitted to the Bank?
5 What is the basis of production? – Production on the basis of the orders received, first produce & then sell or any other.
6 Whether the associate concern/s are appearing as Debtors? If yes, whether all these are proper, genuine trade transactions? If not, then give the amount of such book debts not pertaining to genuine trade transaction/s.(Give comments only if the amount is significant)
7 Whether a system for prompt recovery of book debts is in place? 21
RECORD OF CREDITORS – Sr. No.
Particulars Remarks
1 Whether proper records of Creditors are maintained?
2 Whether the Creditors represent only the Purchase of Raw Materials, Stores & Spares? If no, then what it includes?
3 Whether a system to generate age-wise, party-wise Creditors is in place?
4 Whether the associate concern/s are appearing as Creditors? If yes, whether all these are proper, genuine trade transactions? If not, then give the amount of such book debts not pertaining to genuine trade transaction/s.
5 Whether a system for prompt payments to creditors is in place?
6 Whether the payments made to creditors during a particular period matches with that of the Debit turnover in the account for that period? 22
RECORD OF CREDITORS – Sr. No.
Particulars Remarks
7 Whether the record of creditors matches that with the creditors statement submitted to the bank? If no, state irregularities observed.
8 Give comments on whether the payment terms & credit period is observed?
9 Whether the system of sending “Balance Confirmation Letter” is in place?
10 Give comments on basis of placing the orders.
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GENERAL INFORMATION – Sr.
No.Particulars Remarks
1 Whether Bank’s Hypothecation Board is displayed?
2 Whether Bank’s clause is included in the insurance policy?
3 Whether all the required risks are properly covered?
4 Whether the clause “Loss of profit” is covered by Insurance Policy?
5 Whether all the locations where stocks of the unit are lying are duly covered?
6 Is there an incidence of over and/ or under insurance?
7 Whether system of monitoring of account/s is in place
8 Whether there are cases of diversion of funds? If yes, on what account/s.
9 Give comments on Management – Labour relations
10 Whether the assets taken as security other than stocks are verified?
11 Irregularities, if any, observed while verifying the assets other than stocks
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GENERAL INFORMATION –
Sr. No.
Particulars Remarks
11 Irregularities, if any, observed while verifying the assets other than stocks
12 Details of outstanding statutory dues viz. Excise Duty, Sales Tax, Income Tax, ESIC, Electricity, Water Bills, Rent, rates Taxes.
13 Whether the unit maintains any current account with any other bank/s? If yes, with which bank/s? Whether permission for the same is duly taken from the Bank?
14 Turnover/transactions of such current accounts with other banks.
15 Whether the cash withdrawals from the account/s with the bank are for genuine purposes?
16 Whether the borrower maintains the level of own funds/ unsecured loans including subordinated loans as stipulated?
17 Details about factory layout, person/s responsible for factory management, internal controls.
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RECONCILIATION –
Type of Stock(Lying at)
As per the records maintained with the
unit
As per the Stock statement
Variance % Of variance
Book Debts as per records verified Book Debts as per Stock Statement as of
Variance%
Below 90 days Above 90 Days Below 90 days Above 90 Days
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