Why Year-End Stocktakes Are Critical Under FRS 102 and Audit Standards
As Irish Businesses prepare to close their books for the year, Auditors are reminding companies of the importance of conducting a physical stocktake.
Under FRS 102 Section 13 and ISA (UK & Ireland) 501, inventory verification is not optional—it’s a cornerstone of accurate financial reporting.
What’s at Stake?
Inventory is often one of the largest assets on a company’s balance sheet. FRS 102 requires stock to be valued at the lower of cost and net realisable value, and Auditors must confirm its existence, ownership, and valuation. Failure to do so can lead to misstated profits and qualifications in the audit report.
Audit Standards Demand Evidence
Auditors are required to attend stocktakes where inventory is material. Their role? To observe counting procedures, test samples, and ensure cut-off accuracy so that goods in transit or post-year-end movements are correctly recorded.
Beyond Counting Boxes
A stocktake isn’t just about numbers. It identifies obsolete or damaged goods, which must be written down under FRS 102 Section 27. It also provides assurance that internal controls around stock management are working effectively.
What If You Skip It?
If auditors cannot attend and alternative procedures aren’t possible, you may expect a modified audit opinion—a red flag for lenders and stakeholders.
Action for Businesses
- Schedule your stocktake before or on 31 December.
- Ensure auditors are invited to observe.
- Document variances and valuation adjustments.
- Retain evidence for audit files.