Accurate inventory levels are an essential prerequisite for effective corporate management. They improve decision-making, reduce tied-up capital, lower handling costs, increase planning reliability, enhance customer satisfaction, and provide the foundation for a successful inventory sampling process. Companies therefore have a legitimate internal interest in maintaining accurate stock levels.
To ensure accurate stock quantities, it is advisable to implement an internal control system that includes regular inventory checks—especially for high-value or strategically important items. If such checks are conducted and properly documented in accordance with inventory procedures, a logical question arises: why shouldn’t these already verified items be considered as part of the physical count during inventory sampling?
According to the opinion of the IDW Expert Committee (German Institute of Public Auditors), prior physical verification of stock items is permitted, provided that the documentation complies with legal requirements and the quantities can be reliably carried forward to the balance sheet date.
The scope of inventory sampling typically includes both full count items (usually high-value items) and sampled items. Since sampling requires the selection of sample items via a randomized statistical approach, previously verified items (regardless of their value) can only be considered as full-count items, not as part of the sample.
In practice, this means that a portion of the inventory count—particularly of high-value items—can already be completed in advance of the inventory date, resulting in further reductions in the effort required during the fiscal year-end inventory process.