Audit and Review Readiness
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Inventory Management and Cost Controls
Assess whether inventory quantities, costing, and shrinkage controls are reliable enough to trust margins and balance-sheet values, and what to gather to tighten them.
5 guided steps
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Official guidance links
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Your free guided checker
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
Informational business diagnostic only; not accounting, audit, tax, legal, investment, lending, or valuation advice.
The questions this tool walks you through
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
Does your system show a live on-hand quantity and cost for each item that updates as you receive and sell, rather than only after a physical count?
A perpetual system carries quantity and cost continuously; a periodic system only knows inventory at each count and backs into cost of goods sold in between.
Use the interactive tool above to see how this applies to your situation.
Official guidance: IRS business recordkeeping
Do you count part of your inventory throughout the year on a cycle-count schedule and record the book-to-physical variance each time?
Cycle counting the highest-value or fastest-moving items on a rotation surfaces shrinkage as a measured number, not a once-a-year surprise.
Stand up a cycle-count program and track shrinkage as a measured rate.
Official guidance: IRS business recordkeeping
Does the unit cost on each item include landed cost - inbound freight, duty, and direct handling - and not just the supplier invoice price?
Leaving freight and duty out of unit cost understates cost of goods sold and inflates gross margin, so the profit you see is not the profit you earn.
Rebuild unit costs on a documented FIFO or weighted-average basis that captures landed cost.
Official guidance: IRS business recordkeeping
Do you have items that have not sold in six to twelve months, or whose current selling price is now below what they cost you?
Stock that is slow-moving, expired, or priced below cost should be written down to net realizable value; carrying it at full cost overstates assets and margin.
Write down obsolete and below-cost stock to net realizable value and set a reserve policy. Keep the perpetual, cycle-count, and landed-cost discipline and monitor the trends.
Official guidance: IRS business recordkeeping
Do you know your current unit cost and on-hand quantity for a given item on any day without stopping to count the shelf?
If you can only value inventory right after a count, you are running a periodic system, and cost of goods sold and margin are unknown between counts.
Move to a perpetual inventory system with real per-unit costing before you trust reported margins.
Official guidance: IRS business recordkeeping
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