How does a stock audit impact financial reporting?

A stock audit plays a crucial role in financial reporting by ensuring accurate inventory valuation, minimizing discrepancies, and preventing financial misstatements. It helps businesses verify physical stock against recorded data, reducing the risk of fraud, theft, or operational inefficiencies. An accurate stock audit enhances transparency, supports compliance with accounting standards, and improves decision-making based on reliable financial statements. By maintaining correct inventory records, businesses can present a true financial position, fostering investor confidence and regulatory compliance.