A logistics company audit requires sector-specific expertise. The four highest-risk areas are: (1) inventory ownership — distinguishing own stock from third-party goods; (2) revenue cut-off for in-transit shipments; (3) IFRS 16 lease completeness; and (4) reconciliation between the accounting system and WMS/TMS data.
3PL inventory segregation: the ownership trap
Third-party logistics (3PL) operators store goods on behalf of their clients. Those goods belong to the client — they are not the operator's assets. The audit risk is that stock records in the warehouse management system (WMS) are not clearly tagged by ownership, and goods held for clients end up included in the operator's inventory count — overstating assets.
The reverse risk applies to companies that use 3PL operators: goods stored at third-party warehouses may not be captured in the year-end stock count if the 3PL confirmation process is not robust.
Revenue accruals and cut-off for in-transit shipments
Logistics revenue is often recognised at delivery or at specific milestones. At year-end, a significant volume of shipments is in transit — services have been partially or fully rendered but invoices have not been issued. The correct treatment requires accruing revenue for the stage of completion at the balance sheet date.
Cut-off errors are common because:
- WMS/TMS data and accounting systems may have different cut-off points
- Cross-border shipments may span multiple time zones and customs clearance dates
- Revenue accrual methodology may not be consistently applied across business lines
The auditor will test the revenue accrual methodology, reconcile TMS shipment data to the accrual schedule and verify completeness of year-end reversals.
3PL operator reconciliations
Companies using 3PL operators to store or distribute their goods must reconcile the operator's WMS records to their own stock accounting. Differences arise from: timing of goods receipt/dispatch bookings, damaged or lost goods not yet claimed, and WMS system errors.
At year-end, the auditor expects:
- A complete stock report from each 3PL operator as at the balance sheet date
- Reconciliation to the company's own stock ledger
- Written confirmation from the 3PL operator of goods held (similar to a debtor confirmation)
- Claims or provisions for goods differences already identified
IFRS 16 fleet and warehouse leases
For logistics companies applying IFRS, IFRS 16 is a significant balance sheet driver. Vehicle fleets (trucks, vans, forklifts) and warehouse space previously treated as off-balance-sheet operating leases must be recognised as right-of-use (ROU) assets with corresponding lease liabilities.
Key audit areas under IFRS 16 for logistics companies:
| Area | What the auditor tests |
|---|---|
| Completeness of lease population | Is every vehicle and warehouse lease captured? Auditors often find missing short-term or low-value leases, or leases embedded in service contracts. |
| Lease term | Is the lease term correctly assessed, including extension and termination options? For fleet leases with renewal options, the term must reflect the period the entity is reasonably certain to use. |
| Discount rate | Is the incremental borrowing rate (IBR) supportable? For companies without observable borrowing rates, the IBR calculation must be documented and reasonable. |
| Subsequent measurement | Have lease modifications, renewals and early terminations been correctly accounted for during the year? |
Typical control weaknesses in logistics audits
- No segregation of own vs client goods in WMS: The most common and highest-risk weakness for 3PL operators.
- No formal 3PL confirmation process: Year-end stock at third-party warehouses is not confirmed in writing — creating an unverifiable figure.
- Revenue accrual done manually: Without a systematic approach tied to TMS data, accruals are error-prone and difficult to audit.
- Incomplete IFRS 16 lease register: Fleet leases added during the year are not captured in the lease management schedule.
- Intercompany transport balances not reconciled: Common in companies with captive transport subsidiaries.
Pre-audit checklist for logistics companies
- ☐ WMS stock report as at 31 December, broken down by owner/client code
- ☐ Written confirmation from each 3PL operator of goods held at year-end
- ☐ Revenue accrual schedule reconciled to TMS open-shipment report
- ☐ Complete lease register (vehicles, warehouses, equipment) with lease terms and IBR
- ☐ Reconciliation of intercompany transport invoices and balances
- ☐ Claims schedule for damaged or lost goods
For logistics companies in Łódź and the Tricity (Gdańsk), see also: financial audit Łódź and financial audit Tricity.
Frequently asked questions
Logistics company audit?
JMFC has direct experience with statutory audits of logistics operators, 3PL companies and transport groups — covering inventory segregation, IFRS 16 leases and revenue cut-off procedures.