What Is An Inventory Audit?


An inventory audit is the procedure of accounting for all of a company’s inventory stock levels. This is essentially the spring cleaning of inventory management. The inventory includes all of the products and merchandise a company has and that it plans to sell. The purpose of this process is to get an accurate accounting of your inventory levels and forecast inventory to avoid stockouts in the future.

This process is traditionally carried out by a warehouse manager, other fulfillment personnel, or even an accountant. Having an inventory audit system makes this process much easier. Inventory audits can be done as frequently as a business wants, but they are traditionally done every quarter or every couple of months, depending on the needs of a business.

An inventory management software can be used to automate this process and conduct the audit “at the push of a button,” as opposed to warehouse workers taking a physical inventory count. Automation is a much better route to take than a manual process because it improves the accuracy and speed of the entire operation. Inventory auditing should be a pretty smooth job instead of requiring a great deal of time and labor.


Your inventory count must be exact because it has a significant effect on several parts of your business. You need to know how much additional inventory you need to order, your available budget to order new merchandise, and if this data is reflected accurately throughout your systems. A single error in the inventory count can make any financial statements, inventory record, or audit report generated invalid. For example, if you believe you have more items than you actually have in stock, you probably won’t order enough to meet demand, leading to shortages. On the other hand, if you believe you have fewer items than you actually have, you will probably order too many products and wind up with higher than necessary carrying costs and even potential spoilage or obsolescence as they sit on the shelves.

Preventing waste is the key to running a successful wholesale and/or manufacturing operation. You need to make sure your accounting and inventory stock count match 100 percent for tax reasons, as well as for budgeting and reordering. An inventory audit ensures this is the case, and inventory systems like Fishbowl’s business automation platform integrate your accounting and inventory data together so they will mirror each other perfectly. Any accounting and inventory entries made to one are automatically added to the other. It’s true that the inventory data showing in your system is only as accurate as the inventory being scanned into the system, so inventory auditing will reveal if there are any discrepancies and if the inventory scanning process needs to be more accurate.


Warehouse managers and upper management need accurate data in order to make smart business decisions. Inventory forecasting is a science that needs to be mastered in today’s global and fast-paced marketplace. The inventory audit procedure should give management an accurate snapshot of their inventory level at any given time, as well as all of the inflows and outflows that occur on a daily basis. Based on this information, they can make decisions on how much new inventory to order and it also helps them calculate the reorder points for all of the items in their inventory.

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Inventory audit procedures are a top-to-bottom analysis of a company’s parts, products, and other items in their warehouse(s) and store(s). It is done to ensure the accuracy of inventory records and to plan for inventory needs in the future.

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