Auditing inventory is the process of cross-checking financial records with physical inventory and records.
Observation of inventory is a generally accepted auditing
procedure, where an independent auditor issues an opinion on whether the
financial records of inventory accurately represent the physical inventory
Auditing inventory is an important aspect of gathering
evidence, especially for manufacturing or retail-based businesses. It can
represent a large balance of assets or capital.
Auditing inventory must verify not only the amount of
inventory but also its quality and condition to see whether the value of the
inventory is fairly represented in financial records and statements.