Preparing the warehouse for inventory observation

Inventory observation remains one of the most visible parts of a financial statement audit. When stock is material, auditors attend the count to see whether quantities on the floor match the perpetual records that feed the balance sheet.

Start by freezing receiving and shipping windows for the count night, and print location sheets that match how pickers actually walk the aisles. Tag damaged or consigned goods separately so they are not counted into owned inventory. Controllers should reconcile the perpetual system to the general ledger before the auditors arrive; discovering a variance during the count wastes everyone’s Saturday.

If your company holds inventory at third-party warehouses in Chiba or Kanagawa, arrange access letters early. Tideway cannot observe what we cannot enter, and a scope limitation on inventory often delays the auditor’s report.