An inventory audit is a structured examination of physical inventory and the processes that manage it—conducted internally or by a third party. It checks for consistency between system data and real-world stock, evaluates inventory controls, and helps identify issues like shrinkage, theft, or procedural errors. For instance, a company preparing for financial reporting might bring in auditors to verify that recorded stock values match what’s physically in the warehouse, and to ensure that cycle counts and stock takes are performed according to policy.