Stock Audit for Precious Metals

A stock audit for precious metals is a systemic verification of high-value inventory involved in refining, trading, or mining of gold, silver, platinum, or other precious metals. This process is important to ensure inventory records' accuracy for jewelers, mines, retail outlets dealing with silver or gold, etc. By holding regular stock audit for precious metals, businesses can prevent fraud, ensure compliance with regulatory requirements, and enhance the efficiency of their operations. All businesses that deal with high-value inventory must conduct a stock audit of precious metals. BizFoc is a leading stock auditor for precious metals with a PAN India presence and over ten years of experience in inventory verification across different sectors.

What is a Stock Audit for Precious Metals?

Stock audit for precious metals refers to a systematic examination and verification of inventory related to valuable metals such as gold, silver, platinum, or other precious metals. This process is essential for businesses involved in the mining, refining, trading, and retailing of these valuable commodities. It ensures the recorded precious metal stock level matches the actual physical inventory on hand and helps identify any discrepancy in the stock. Conducting regular stock audits for precious metals helps maintain business operation efficiency, protect assets from theft, and safeguard profitability.

Stock Audit for Precious Metals: Applicability & Limit

Many MSMEs conduct precious metal audits due to management requirements rather than regulatory requirements. The precious metal stock verification is carried out as prescribed under the Companies (Auditor's Report) Order, 2020, also known as CARO, 2020. The CARO, 2020 applies to the following organizations:

Public Listed Companies

• The precious metal audit applicability on private companies in case any of the following limits are satisfied:
• Gross receipts or revenue is more than ₹ 10 crore in the financial year.
• Paid-up share capital plus reserves is more than ₹ 1 crore.
• Holding or subsidiary of a public listed company.
• Borrowings are more than ₹ 1 crore throughout the financial year.

Stock Audit for Precious Metals: Report Format

There is no standard format prescribed for the stock audit report for precious metals. Every business can have their format depending on the purpose of the audit. The auditor's report is usually accompanied by an Excel sheet for conducting any further analysis by the company. The report typically contains the following information:

• Location code and name
• Date of stock audit
• Details of SKU
• Count of physical stock for each SKU
• Count of stock as per books of accounts for each SKU
• Variance between physical stock and books of account for each SKU
• Any remarks for the variation
• Signature of unit incharge
• Signature of stock auditor

Procedure of Stock Audit for Precious Metals

There is comprehensive guidance on the process of precious metal audit which helps to conduct the audit properly:

Step 1: Planning of Audit

It is necessary to know the auditing scope, types of inventories, locations, and specific items to be audited. A precious metal audit timeline must be set, considering the company’s function schedule.

Step 2: Conducting Physical Verification

To perform a physical count of the inventory stocks, one must use a systematic approach, like ABC analysis or cycle counting, to ensure comprehensive coverage, and discuss with the appropriate department for the counting process.

Step 3: Physical Inventory vs. Book Inventory

Compare the physical counts with the inventory, which has already been recorded. Write down the outcomes, investigate and reconcile irregularities, and document the reasons for variations after discussing them with the team on the ground.

Step 4: Report Preparation and Submission

Make a report of precious metal audit findings, which includes any irregularities and suggestions for enhancement. To give a summary record to high-level management, highlight key outcomes, and recommend appropriate actions.

Stock Audit for Precious Metal Checklist

Inventory audit checklist that is required to be followed for conducting an effective precious metal audit:

• Decide on scope of audit, time period and locations to be covered
• Gather required stock / SKUs details against which stock needs to be verified
• Recording the stock auditor team in and out time to the premises
• Recording the physical counts of stock / SKUs
• Ensure all stock / SKUs covered in the SKUs are covered
• Discuss and get the confirmation of the stock audit finding between unit in charge and stock auditor
• Present your findings along with any suggestions for improvement

Stock Audit for Precious Metals Fee in India

The fee for precious metal audit services in India can vary depending on various factors such as the number of SKU, night audit, location, days required, and inventory complexity. The stock audit fee starts from ₹2,499 per day, which excludes out of pocket costs and varies with the stock audit scope.

Benefits of Stock Audit for Precious Metals

• Financial report development: Improving the existing inventory management, which leads to accurate financial reporting. Maintaining a well-stocked ledger means presenting a correct financial condition in the business, and also helps to make better decisions.
• Identifying and preventing fraudulent affairs: It helps to identify fraudulent affairs like misappropriation or theft of stock, and any discrepancies, which may affect business severely. It helps companies take necessary actions and prevent future occurrences or financial losses.
• Streamlining stock processes: The precious metal management must be efficient; thus, it leads to streamlining business operations. It shows the inefficiencies in the stock handling procedure and allows companies to optimize their process for better efficiency.
• Recognizing Overstock and Understock Situations: Overstocking ties up capital, while understocking can result in missed sales opportunities. Precious metal audits help in recognizing optimal stock levels, minimizing financial losses, and improving cash flow.

Challenges while Conducting a Stock Audit for Precious Metals

Here are some common challenges faced by the precious metal industry:

• High Value and Volatility: The high value of precious metals can lead to various financial risks during the audit process.
• Complex Supply Chains: Precious metals often move through complex supply chains, making it difficult to track ownership and custody at every stage.
• Fraud and Theft Risk: Due to the high value of these precious metals, there are higher chances of fraud and theft. It’s essential to maintain proper security and require a vigilant auditor.

Bizfoc: Precious Metal Audit Company in India

Bizfoc is a leading precious metal berification service provider firm in India with a presence in PAN India. The Bizfoc team has more than 10 years of experience in inventory audits, assisting companies like Tanishq and other Jewelers. Bizfoc provides best-in-class services at transparent pricing with a high degree of precision.

Conclusion

In conclusion, Stock audits for precious metals are important for organisations where significant money is invested in the inventory. Regular audits help to identify the dispensaries, maintain regulatory adherence, and prevent fraud. By implementing effective stock auditing can protect your valuable assets and foster stakeholder trust. It ensures the correctness of the stock recorded in the book of accounts and highlights any discrepancies like theft, slow-moving items, and supply chain issues related to the inventory of precious metals. Thus, a stock audit of precious metals helps improve the organisation's profit and loss.

Frequently Asked Questions (FAQs) on Stock Audit for Precious Metals