The following are the procedure should be followed/ work has to be done in relate to Stock Audit

in banks:

1. Prepare a table for the Cash credit, Packing credit, Foreign bills purchased for the
period specified: The table format is
 Year/ Months
 Closing balance for the month/year end
 Maximum Outstanding balance for the month/year end
 Interest debited to the C.C/P.C/F.B for the month/year end.
2. Prepare a Stock Statement for Cash Credit in the given period and arrive a Drawing
power: The table format is

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Month/yea Nam Accoun Stoc Debtor Creditor Paid-up Paid up Drawin Limi
r e of t k s s stock debtors g power t
the number (usually (usually
party 75% of 50% of
Stock- Debtors- Column
Creditors Creditors (7+8)
) )
Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Note:
- Usually margin may be defined in sanction order 25%, some cases it may differ for
stock, debtors; in such cases we have to alter the statement accordingly.
3. Cross check the Drawing powers in system (books of accounts) with the Stock statement
as prepared above, and fill the limit column in stock statement from system. In case of
variation in Drawing powers as per system and stock statement highlight it accordingly.
4. Prepare a Stock Statement for Packing Credit in the given period and arrive a Drawing
power:
 The table adopted for C.C is same for P.C also
 After preparation of stock statement, cross verify the Drawing power with system
and note any variation’s if found.
5. Verify the Receivables statement differentiate it from local sales and export sales.
6. Analyze Age wise details of Debtors, such <30 days, 30-60 days, 60-90 days, >90 days.
7. Prepare a Account Turnover Report for the party to whom the stock audit is to be made:
The table format is
 Year/Month
 Total all the credit side of the C.C Account during the month/year (excluding
cash deposit, transfer from any financial institution, cheque returns and other
similar items)
 8. Take a list of major customer for the borrower (party)
9. Verify insurance premium paid for the stocks, and check the policy is in effective.
10. Check the Bank Hypothecation clause in policy document for the stock’s which the banks
has sanctioned Cash credit.
11. Verify the ECGC premium paid for all the period during which stock audit has to be
conducted, and check on what value the premium was calculated.
12. Verify the Debtors/ Stock sheet submitted by the party to a bank is certified by the
Chartered Accountant (as required by the bank, such as monthly, quarterly, half yearly).
13. Check in system, whether there are no huge cash withdrawals on C.C or P.C during the
period.

Checklist for Stock Audit/Unit Inspection

Basic Information
(1)           Name of the borrower
(2)           Location
Office
Godown
(3)           Nature of Business
(4)           Particulars of credit limits
 
Loan A/c Facility Sanctioned Limits D. Balance O/S Overdue/excess
No P
           

 
(5)           Particulars of security:
(A)                             Primary:
 (B)                             Secondary
(6)           Insurance Particulars:
Policy Assets covered/ Amount Date of expiry of Whether Bank clause exists
No Location Insured Policy in the policy
         
(7)           Name of the audit staff conducting the Inspection:
(8)           Name of the Branch official representing the Bank:
Checklist
(1) Hypothecation of Plant & Machinery
i. Whether Plant & Machinery is maintained properly and found in working condition  
ii. Were there any instances of breakdown causing interruptions in the working of the unit  
in the recent past?
iii Whether fire protection measures are satisfactory?  
.
iv. Whether security arrangements at the godown/ Factory are satisfactory?  
v. Whether Bank’s hypothecation Board has been affixed on the machinery hypothecated?  
(2) Stock Hypothecation
i. Descripttion of the stocks  
ii. Whether stock register is maintained and is up to date?  
iii. Whether the quality and sale ability of the stocks are good?  
iv. Have they been stored properly?  
v. Whether there is direct access to the godown?  
vi. What is the value of  
Obsolete stock
Slow- moving stock
Damaged/Rejected stocks
Unpaid stock
vi. Whether the Bank Hypothecation Board has been displayed?  
vii. Whether the stocks represent those reflected in the stock statements sent to the Banks?  
viii. Whether stocks belonging to sister concerns, received for job- work etc are properly  
segregated?
ix. Whether the movement of stock in and out of the godown is properly accounted and  
monitored?
x. Whether any differences exist between actual stocks and the stock books?  
xi. Is the level of inventory held found to be too high?  
xii What is the Work in progress and level of completion?  
xii. Whether the goods which require any specialized preservation, are properly preserved?  
xii. Whether the stock is protected from fire hazards and is well guarded?  
(3) Hypothecation of book- debts
i. Whether book-debts accounts/registers are maintained properly and kept up to date?  

ii. Whether book debts bifurcation age wise available?  

 iii Whether the debt represents sales and service transactions only?  
iv Whether all realizations from debtors are routed through the borrower’s account?  
(4) Conduct of Account
i. Whether sales and purchases are routed through the account?  
ii. Whether operations in the account are satisfactory?  
iii Whether stock/QIS statements are received regularly by the  
Bank?
iv Whether the Balance outstanding is within the drawing power?  
.