Audit Risk and Inventory Verification
Prove inventory accuracy and reduce audit risk with continuous independent verification.
Why is inventory accuracy challenged during audits?
The day-to-day operations of a warehouse are reliant on the confidence of system records to provide accurate and up-to-date stock data. However, Warehouse Management Systems work on assumed data rather than physical reality. This creates an immediate risk to audit compliance.
Inventory audits scrutinise this data by checking the physical presence of the stock recorded on the system. Questions often surface during audits, because assumed accuracy must suddenly be demonstrated, not inferred.
Here, we’ll explain why audits expose inventory risk and why frequent independent verification is crucial to minimising this.
Why Warehouse Management System (WMS) data is not audit evidence
WMS platforms are designed to record transactions and movements of stock in your warehouse; they don’t independently confirm the physical presence of stock or verify its location is correct. Despite being used as a warehouse’s source of truth, WMS data does not always consistently reflect what’s happening in the warehouse racks.
From an audit perspective, this distinction matters. Transaction logs show what should have happened, while stock records display what stock is expected to be present. Neither independently confirm the physical reality.
As a result, audits often uncover discrepancies that the inventory control team did not even know existed, and that subsequently require reactive explanations to auditors.
The risk of reactive explanations
When audits uncover inventory discrepancies, organisations often have to shift into reactive investigation mode. This can lead to:
Longer audit timelines and the associated operational disruption
Greater management involvement
Uncertainty around root cause
Reduced confidence in WMS-reported data
Without regular independent verification, explanations tend to rely on assumptions rather than hard evidence.
Reducing audit risk with independent verification
Independent inventory verification gives you an objective view of what’s physically present over time, not just what the WMS believes should be there.
By maintaining an evidence-based audit trail, organisations can demonstrate inventory confidence with ongoing, independently verified data. The result is more accurate system data and smoother audit processes – shifting their purpose from error identification to validation.
How audit risk relates to inventory assurance
Audits are often the moment the Inventory Assurance Gap becomes impossible to ignore – when WMS and physical reality do not align. Understanding this gap, how it develops, and the severity of it, is the first step towards addressing audit compliance risks and building confidence and transparency in your inventory reporting.
What to do when inventory confidence is at risk
As we’ve explained, the most effective way to reduce audit risk is to introduce regular, independent verification as part of the business-as-usual process. That means integrating a consistent evidence trail, tracking physical stock overtime, so inventory confidence is maintained proactively rather than defended retrospectively.
That’s where our solution comes in. inventAIRy XL provides a practical way to independently verify inventory on a regular basis, helping keep WMS-reported data aligned with physical reality, without disrupting warehouse operations.