Inventory Auditing & Data Accuracy Flashcards

Which audit method involves counting a small subset of SKUs every day so that all items are counted multiple times per year?

Answer: Cycle counting

Cycle counting divides inventory into segments counted on a rotating schedule, eliminating the need for a single annual shutdown count.

A warehouse reports 500 units on-hand in the WMS, but a physical count yields 487 units. What is the inventory record accuracy (IRA) for this SKU?

Answer: 97.4%

IRA = (487 / 500) × 100 = 97.4%, measuring how closely records match physical reality.

Under ABC cycle-counting, 'A' items are typically counted:

Answer: Most frequently — often monthly or more

A-class items represent high value or high velocity and are counted most frequently to maintain tight accuracy.

What is the primary purpose of a 'blind count' during a physical inventory audit?

Answer: To prevent counters from being biased by system quantities

A blind count withholds system quantities from counters so they record what they actually see rather than confirming the system figure.

Which document is typically used to reconcile discrepancies between physical inventory counts and system records?

Answer: Inventory adjustment memo

An inventory adjustment memo (or adjustment transaction) formally records and authorizes corrections to system quantities after a count discrepancy is investigated.

A 'phantom inventory' problem occurs when:

Answer: Items show positive balances in the system but are not physically present

Phantom inventory refers to stock that appears in the system but doesn't physically exist, often caused by theft, damage write-offs not processed, or receiving errors.

Root cause analysis after an inventory audit discrepancy should focus primarily on:

Answer: Identifying the process failure that allowed the error to occur

Sustainable accuracy improvement requires finding and fixing the underlying process failure, not just correcting the number.