Call For Business Enquiries : +91 97650 00966 / +91 98190 00511 / +91 98218 32683
Call For Business Enquiries : +91 97650 00966 / +91 98190 00511 / +91 98218 32683
Bank Stock Audit · Panaji, Goa
Bank-mandated physical verification of inventory hypothecated against CC and OD facilities — drawing power validated, stock statements reconciled, and a full report delivered in your bank's required format.
Overview
A stock audit — also called a bank stock audit or hypothecation audit — is a physical verification and valuation exercise conducted on the inventory hypothecated to a bank or financial institution as security for a Cash Credit, Overdraft or working capital facility. Banks extend working capital credit against the value of stock and receivables, but the fundamental risk is whether the stock the borrower claims to hold, as stated in the monthly stock statements, actually exists, is correctly valued and is in saleable condition. A periodic stock audit by an independent Chartered Accountant answers that question.
For businesses in Goa — hotels with beverage and supply inventories, pharmaceutical companies with finished goods and raw materials, trading firms with imported goods, and manufacturing units with work-in-progress — the bank-mandated stock audit is an annual or semi-annual requirement tied directly to the continuation of the credit facility. N D Savla & Associates conducts stock audits for businesses across Goa with facilities from public and private sector banks and NBFCs, and takes assignments on short notice when banks require urgent verification. For the internal management perspective — cycle counting, ABC analysis, variance investigation — see our Inventory Stock Audit guide. For fixed assets, see our Fixed Asset Audit and Verification guide.
Why banks require it
Stock audits protect the lender's security and surface borrower distress early.
Get a fixed-fee quote →Drawing power is the maximum the borrower can withdraw against the CC limit, calculated as a percentage of stock and receivables — commonly 75% of stock value. An inflated stock statement inflates the drawing power, letting the borrower draw more than the security justifies. The audit verifies the values are accurate.
The bank's credit is secured by a first charge on inventory. If stock has deteriorated, become obsolete, been sold without reducing the drawing, or does not exist at all, that security is compromised. Physical verification identifies these risks.
The RBI's Master Directions on bank credit management require banks to obtain independent stock audits for borrowers above specified credit exposure limits, as part of ongoing credit monitoring.
Stock audits often reveal early signals of borrower distress — declining inventory quality, slow-moving or non-moving stock, significant book-to-physical variance, or inability to produce documentation for inventory claimed.
By facility type
| Credit facility type | Bank requirement | Frequency | Who conducts |
|---|---|---|---|
| Cash Credit (CC) against stock hypothecation | Borrower submits monthly stock statements; periodic stock audit verifies physical stock matches the statement | Annually; half-yearly at some banks for larger limits | Chartered Accountant appointed by, or acceptable to, the bank |
| Overdraft (OD) against stock or receivables | Physical verification of stock and debtors against the drawing power calculation submitted | Annually | CA appointed by or acceptable to the bank |
| Working capital term loan (WCTL) | Stock and receivables verification as part of credit monitoring; may require concurrent or periodic audit | As per loan agreement | CA or empanelled auditor |
| Large exposure (> Rs. 5 crore CC limit) | RBI Master Direction on credit monitoring requires independent stock audit reports; often a sanction letter condition | Annual, or more frequent for stressed accounts | Bank-empanelled CA firm; RBI may specify an independent CA for special cases |
| NPA and stressed accounts | Special stock audit or stock takeover audit to verify security value before enforcement action | Triggered by NPA classification or bank decision | Bank-appointed CA or valuer |
Our process
Collect the bank stock statement, the stock register, the location list, and the bank's format requirements.
Count at each location on or near the statement date, by SKU, batch or measured bulk quantity.
Compare to the statement and to the books, test valuation, and flag slow-moving and obsolete stock.
Delivered to the branch in the bank's format within the agreed timeline, with a copy to the borrower.
We obtain the latest stock statement submitted to the bank, showing opening stock, purchases, sales and closing stock; the borrower's own stock register and book balances as at the audit date; the list of all stock locations — godowns, warehouses, factory stores, showrooms — to be covered; and we coordinate with the bank branch on any specific audit requirements or report format preferences.
We visit each location on the audit date, ideally the same date as the statement being verified or as close as possible. Each item is physically counted and recorded. Bulk items such as iron ore, sand and chemicals are estimated using measurement techniques — volume by density, weighbridge records. Finished goods are counted by SKU with condition noted as saleable, slow-moving, damaged or obsolete. Work-in-progress is estimated by stage of completion based on material and labour inputs.
The physical count is compared to the bank stock statement and to the stock register, and variances identified. We verify the valuation method — stock at cost or net realisable value, whichever is lower, per AS 2 — and whether it is consistent with prior periods. Slow-moving, non-moving and obsolete stock is flagged for provision or exclusion from the drawing power calculation, and we verify that hypothecated stock is at the locations declared to the bank and has not been pledged to another lender.
A comprehensive report in the bank's preferred format covering physical stock quantity and value; reconciliation with the bank statement and the books; stock condition assessment; variances identified with explanations; and the auditor's observations and qualifications where applicable. Submitted to the branch typically within 7–15 days of the audit date, with a copy provided to the borrower.
Sector focus
Hotels with CC facilities against beverage stock — wines, spirits, beer — food inventory and operating supplies such as linen, crockery and guest amenities require periodic audits. The particular challenges: high-value items like premium spirits and imported wines need careful count against purchase invoices; perishable food must be valued at net realisable value; operating supplies have mixed lifespans and must be categorised separately from trading stock; and bar revenue must be reconciled against stock reduction.
Pharma companies in Goa, particularly in the Verna and Pilerne industrial estates, hold significant raw material, packing material and finished goods inventories. Our audits cover Good Manufacturing Practice storage condition verification; batch-wise physical count reconciled with batch manufacturing records; expiry date assessment and provision for near-expiry stock; and verification of imported raw material against customs clearance documents.
Frequently asked questions
It depends on the sanction conditions your bank has set for the facility. Most banks require an annual stock audit for CC limits above a specified threshold — typically Rs. 1–5 crore depending on the bank's credit policy. Check your CC sanction letter. At a Rs. 2 crore limit it is very likely a condition of the facility, either explicitly stated or implied by the bank's standard credit monitoring policy.
Technically the same CA can conduct it, but most banks prefer an independent auditor to ensure objectivity. If your statutory auditor also conducts the stock audit there may be a perception of conflict, and many banks specify that the stock auditor must be independent of the borrower's regular auditor. Check your bank's requirement — we conduct stock audits for businesses whose statutory audit is handled by another CA firm.
A single location with straightforward inventory — a retail shop or small trading firm — typically takes one day. Multiple locations, complex inventory types such as bulk goods, pharma batches or high-SKU retail, or large warehouses can take 2–5 days. We provide an estimated timeline when we accept the assignment, based on the number of locations, stock types and item count.
Drawing power is the maximum you can withdraw against the CC limit, calculated as a percentage of the value of stock and receivables — commonly 75% of stock value. If the stock statement is inflated, the drawing power is too. The audit verifies that the statement values are accurate, and slow-moving or obsolete stock identified during the audit may be excluded from the drawing power computation.
Typically within 7–15 days of the audit date, in the bank's preferred format. It covers physical stock quantity and value, reconciliation with the bank statement and the books, stock condition assessment, variances with explanations, and any auditor qualifications. You receive a copy for your own records.
Related audit services
Bank stock audit for CC/OD facilities — physical verification, drawing power validation and the stock audit report. Book a free consultation with a qualified Chartered Accountant in Goa.