Stock Audit Services in Delhi | Bank Stock Audit & Drawing Power Verification

In a Nutshell: A Stock Audit Tests the Number Your Bank Lends Against

A stock audit checks whether the stock and receivables a borrower declares to its bank actually exist, are valued correctly and support the drawing power on a cash credit or working capital limit. Startup Advisory carries out stock audits for banks, and prepares borrowers for them so the bank’s auditor finds nothing new.

Who asks for it: lending banks and NBFCs, for borrowers whose working capital limits cross the threshold in the lender’s credit policy — usually annually, sometimes half-yearly.
What is checked: physical stock against the stock statement, valuation at lower of cost and net realisable value, ageing, obsolete items, receivables and creditors.
Output: stock audit report in the bank’s format with a recomputed drawing power and an observation list.
Link to CARO: where working capital limits from banks exceed ₹5 crore, the statutory auditor reports whether quarterly returns to the bank agree with the books.
Borrower-side prep: a mock stock audit before the bank’s visit, so differences are explained before they are reported.
Provider: Startup Advisory, CA firm in Saket, New Delhi 110030. Call 9311972982.

Reviewed by CA Neeraj Rohilla, FCA — Chartered Accountant, Startup Advisory, Saket, New Delhi.

The Stock Statement Is a Promise. The Stock Audit Checks It.

Every month a working capital borrower tells the bank how much stock and how many receivables it holds, and the bank lets it draw against a percentage of that number after the agreed margin. A stock audit is the bank’s check that the promise holds: that the goods are physically there, belong to the borrower, are valued sensibly, and that the receivables are real and collectable. Differences between the stock statement and reality are the most common reason a renewal turns difficult.

What a stock audit covers

Physical verification: a test count of high-value and fast-moving items at each location, reconciled back to the stock register and the statement date.
Valuation: at the lower of cost and net realisable value under AS 2 / Ind AS 2, with consistent cost formulas and no profit element in closing stock.
Ageing and quality: slow-moving, non-moving, damaged and obsolete stock identified and excluded from drawing power where the sanction terms require.
Ownership: goods held on consignment, job-work or for third parties separated out; goods in transit verified against documents.
Receivables: debtor ageing, confirmations or subsequent receipts for large balances, and exclusion of receivables beyond the sanctioned age limit.
Creditors: trade creditors deducted for drawing power where the sanction requires paid stock only.
Security and insurance: hypothecation display at the premises, insurance cover adequate in value and location and naming the bank.
Drawing power: recomputed from verified figures, compared with what the borrower declared and what the bank allowed.

Stock audits and the statutory audit

Clause 3(ii)(b) of CARO 2020 requires the statutory auditor of a company that has been sanctioned working capital limits above ₹5 crore, in aggregate, from banks or financial institutions on the basis of security of current assets, to report whether the quarterly returns or statements filed with them agree with the books. Unexplained differences end up in the audit report. A stock audit that reconciles statements to books through the year avoids that surprise in September.

For borrowers: be ready before the bank’s auditor arrives

Mock stock audit: we run the bank’s procedures first and give you the differences while there is still time to correct records.
Stock statement process: a monthly reconciliation from books to statement so the figure declared is one you can defend.
Ageing discipline: receivable and inventory ageing built into your monthly close through bookkeeping or Virtual CFO support.

A bank-appointed stock auditor works for the bank. We do not accept a bank’s stock audit mandate on a borrower for whom we have prepared stock statements or done borrower-side preparation.

Related Audit & Assurance Services

Store Audit →Stores and inventory controls — receipts, issues, consumption, min-max levels, slow-moving stock and leakage.

Fixed Assets Audit →Fixed asset register review, capitalisation, depreciation, CWIP and title checks — aligned to CARO 2020 clause 3(i).

Concurrent Audit →Real-time audit of transactions for banks under RBI’s concurrent audit guidelines, and for businesses with high-volume payments.

Internal Audit →Risk-based internal audit under Section 138 — process reviews, control testing and quarterly reports to the board or audit committee.

See all audit & assurance services

Frequently Asked Questions

A stock audit is an independent verification, usually commissioned by a lending bank, of the inventory and receivables a borrower has declared in its stock statements. It checks existence, ownership, valuation and ageing, and recomputes the drawing power available against the working capital limit.

In a bank stock audit, the bank appoints the auditor, usually from its own panel, and sets the scope and report format. The fee is frequently charged to the borrower under the sanction terms. A borrower can separately appoint its own firm for a preparatory mock audit.

There is no single statutory threshold that applies to every borrower. Banks set stock audit requirements in their credit policies, typically for borrowers above a certain working capital exposure, and write them into the sanction letter. Once in the sanction, it is a contractual condition.

Broadly, eligible stock plus eligible receivables, minus trade creditors where the sanction requires paid stock, with the margin stipulated by the bank applied to each component. Ineligible items such as obsolete stock or receivables beyond the age limit are excluded. The exact formula is in your sanction letter.

The bank may reduce the drawing power, require the excess drawing to be regularised, ask for additional security, or tighten monitoring. Persistent unexplained differences can affect renewal and the account’s risk rating. A mock audit beforehand is the cheapest way to avoid this.

For a single-location trader or manufacturer, fieldwork is usually two to four days, with the report following within a week. Multi-location borrowers take longer. Call 9311972982 for a scoped quote.

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