The short answer
An inventory audit checks that the stock in your books exists, belongs to you and is valued correctly. Under IFRS, inventories are measured at the lower of cost and net realisable value. We attend or run the count, reconcile it to the ledger, test valuation and report shrinkage and control gaps.
How must inventory be valued?
At the lower of cost and net realisable value, using specific identification for items that are not interchangeable and first-in, first-out or weighted average cost for those that are (IAS 2 Inventories, IFRS Foundation). Slow-moving, damaged or obsolete stock is where valuation usually goes wrong: if it can only be sold below cost, the write-down belongs in this year's accounts.
What happens during a stock count?
We plan the count with you, freeze movements or record cut-off documents, count with your team or independently, and test counts both ways: from the floor to the records and from the records to the floor. Differences are investigated the same day while the evidence is still there. The count then ties into the year-end audit, which Qualifying Free Zone Persons and businesses with revenue above AED 50 million must have (Ministerial Decision No. 82 of 2023).
“Inventories are measured at the lower of cost and net realisable value.”
How do you find the cause of stock losses?
By following the losses back through the process: receiving, put-away, transfers between sites, returns, write-offs and sales. Most shrinkage traces to a handful of weak points, such as unrecorded transfers, unapproved write-offs or returns booked without stock coming back. The report ranks findings by value and gives each one a specific control fix.
Who needs an independent inventory audit?
Traders, retailers, distributors and manufacturers where stock is a large part of the balance sheet, lenders who rely on inventory as security, buyers in an acquisition, and owners who suspect losses. Free zone traders also need clean stock records for customs, since free zone stock gaps are a common customs audit trigger.
Frequently asked questions
How often should stock be counted?
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At least at the year end; high-value or fast-moving lines benefit from monthly or rolling cycle counts.
Can you count stock at several sites at once?
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Yes, with enough staff and a common cut-off so that transfers between sites are not counted twice or missed.
Is LIFO allowed?
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IFRS permits specific identification, FIFO or weighted average cost. Use one consistent method for similar items.
Sources
- IAS 2 Inventories — IFRS Foundation. Checked 17 October 2026.
- Ministerial Decision No. 82 of 2023 on audited financial statements (revenue above AED 50 million and Qualifying Free Zone Persons) — UAE Ministry of Finance. Checked 16 October 2026.