Banks that give working capital loans against inventory and receivables, such as cash credit, often appoint a Chartered Accountant to carry out a stock audit. The aim is to confirm that the stock and debtors reported to the bank actually exist and are valued correctly.
The auditor physically verifies stock on a test basis, checks valuation and the ageing of stock and debtors, compares the stock statements filed with the bank against the books, and recalculates the drawing power. Differences are reported to the bank.
Key points
- Keep monthly stock statements consistent with the books of account
- Identify slow-moving, obsolete and damaged stock separately
- Keep an up-to-date ageing of debtors and creditors
- Make sure insurance covers the stock at all locations
- The scope of the audit is set by the bank, not by the borrower
General information only, not professional advice. Section references are to the Income-tax Act, 1961; corresponding provisions of the Income-tax Act, 2025 apply from 1 April 2026. Thresholds and dates may change by notification.
CA Rahul Rajendra MohiteACA, M.Com · ICAI Membership No. 622387 · Founder, Rahul R. Mohite & Co., PuneFirm profile and key facts