Inventory Audit Vs Leverage

Inventory audit as the name itself suggests is the audit for the inventory in the organization. The audit procedure for inventory audit involves confirming or cross-checking the financial records of inventory with its physical count. Inventories generally form a significant part of the total asset, especially in manufacturing companies. Inventories include manufactured goods available for sale in a normal course of the business, work in progress goods, supplies, goods used in the production of goods and services. Since inventory is such important for every business, therefore, inventory audit is important as well. The process involves verifying whether the value of inventory appearing in the entity’s books is actually present with the entity or not. Leverage results from using borrowed capital as a funding source when investing to expand the firm’s asset base and generate returns on risk capital. Leverage is an investment strategy of using borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment. Leverage can also refer to the amount of debt a firm uses to finance assets.

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