V3I5P113

Auditors Perceptions on the Necessity of Stock Auditing in Start Up and Small Business 

Harish KL

Abstract

The research explores auditors’ opinions about the need and importance of performing stock audit in start- up and small business ventures. In the current business scenario and highly competitive market, inventory management occupies a major position in all aspects of financial information, operation system and internal control system. However, startups and SMEs generally underestimate stock auditing for lack of finance and other related support systems, informal accounting system and lack of awareness. The research aimed to study auditors’ opinion about the necessity and effectiveness of stock auditing in start-up businesses, major difficulties encountered during stock auditing for start-up business, the benefits derived from stock audit in start-up business and how the auditing could be improved in the given situation.

The research employed a descriptive and analytical research design, primary data were collected through the structured questionnaire distributed among the auditors, accounts professionals and practitioners primarily located in the city of Bengaluru. Convenience sampling has been employed and targeting has been more on beginners and mid-level auditors who were exposed to audit activities for start-up and SME firms. Both descriptive and inferential statistical analysis tool were utilized.

The results indicated that majority of the auditors strongly believed that the stock audit is essential for start- up and SMEs. They highlighted that stock audit is essential to have a clear picture of financial information, safeguard the assets and avoid issues related to theft, loss and ineffective inventory management. Further the result shows that inadequate recording of stock data, staff’s non-cooperation and budget limitations are the key challenges encountered during the auditing process and stock audit enhances the transparency, accountability and reliability in the startups business.

In summary, stock audit must not be treated just as a regulatory need but as a valuable instrument to achieve business growth and Financial discipline. The report identifies the shortcomings in record keeping system, implementation of automated/tech based inventory management system and the inadequacy of audit systems for startups and SMEs.

Keywords:

Stock Auditing; Startups; Small Businesses; Inventory Management: Auditors’ Perception