2. Poor inventory management
An external audit will proceed far more smoothly for a manufacturer that closely tracks, in real time, the quantity and cost of materials in its warehouses, where they’re located, how they’re being used, and what inventory will be needed in the near future.
Conversely, poor inventory management is a top contributor to audit complexity. A lack of inventory controls, discrepancies across locations, poor labeling, and other issues make inventory testing more challenging for an auditor. These challenges might require an auditor to pursue additional observation and testing.
Solutions:
- Company management can address inventory issues in myriad ways – from inventory software to smarter purchasing and storage solutions – and reap numerous business benefits.
- Manufacturers should consult with external auditors with deep experience in their industry who will have insights into navigating inventory management challenges – because they’ve likely already encountered similar challenges with previous clients – and can demonstrate skilled judgment. They’ll know which questions to ask, where to seek additional information, and which managers to pull into discussions, saving time and reducing frustration.