Field Notes · 2 April 2026
Preparing inventory for observation day
Practical steps for warehouse supervisors and controllers before auditors attend a physical inventory count as part of a financial statement audit.
When inventory is material, auditors attend the physical count. The day goes smoothly when the warehouse is already counted in an orderly way — not when cartons are still being relocated between aisles.
Two weeks before
Freeze receiving and shipping windows if your operations allow it. Print count sheets by location. Separate consignment stock and customer-owned goods so they are not double-counted into your books. Tell the audit team which locations will be counted first.
On the day
Assign counters who know the product codes. Keep a clear desk for recounts. If scrap or damaged goods sit in a corner, label them before we arrive; silent scrap piles create reconciliation noise later. We will select test counts — please expect us to ask for sealed cartons to be opened on a sample basis.
After the count
Roll the count sheets into the perpetual records the same day if possible. Provide the book-to-physical variance analysis with reasons, not only totals. Auditors care why the variance exists: cut-off errors, unrecorded receipts, or measurement differences each lead to different audit responses.