## Audit of Stores and Inventory (Government Audit)

### Purpose

The audit of stores and inventory in government departments aims to verify that public resources in the form of physical stores are properly managed, accounted for, and not wasted.

### Five Key Objectives

Objective	What the Auditor Checks
1. Regulations are proper	Whether regulations governing purchase, receipt, issue, custody, sale, and inventory taking of stores are well-devised and properly carried out
2. Deficiencies brought to notice	To bring to the notice of government any deficiencies in quantities of stores held or any defects in the system of internal control
3. Purchases properly sanctioned	To verify that purchases are properly sanctioned, economical and made in accordance with the rules
4. Prices reasonable	To ensure that prices paid are reasonable and in agreement with those shown in the contract
5. Account accuracy	To check accounts of receipts, issues and balances for accuracy, correctness and reasonableness

### Special Reporting Requirements

Excess or idle inventory must be specifically mentioned in the audit report
The auditor must check that the price charged is reasonable
Valuation of inventories must be examined carefully

Worked example

### Example 1

Excess inventory: During audit of a government printing press, the auditor finds that paper stock worth ₹2 crores has been lying unused for 3 years, partially damaged. This excess/idle inventory must be specifically mentioned in the audit report with recommendations for disposal.

### Example 2

Price verification: The auditor compares the rates paid for purchase of stationery items against the rate contract approved by the DGS&D (Directorate General of Supplies & Disposals). Any excess payment over contracted rates must be reported.

### Example 3

Purchase sanction: A government hospital purchased medical equipment worth ₹40 lakhs. The auditor verifies that the sanction for this purchase was obtained from the competent authority (e.g., Ministry level approval required for purchases above ₹25 lakhs as per financial delegation rules).

⚠️ Common exam mistakes

Limiting the answer to only price verification — all five objectives should be covered.
Forgetting to mention the special reporting requirement for excess/idle inventory.
Not mentioning that the valuation of inventories must be carefully checked — government inventory valuation has specific rules.

Reference:

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Government Audit — Audit of Stores and Inventory

Worked example

⚠️ Common exam mistakes