Proper segregation of duties must exist during stocktake.
As an auditor, we need to observe that the stock take team consist of:
1) Counter (Warehouse personnel)
2) Checker (Staffs from department other than warehouse department)
Warehouse personnels are the people who has direct access to the Company's stocks. Why should the warehouse personnel (counter) accompanied with a checker during stock take? This is to prevent potential fraud case and observe the normal inventory management procedures of the client. Warehouse personnel are the people who has day-to-day access to the warehouse. Assuming, they steal one and reported one stock lesser during stock take, nobody will not realize the fraud case, unless the inventory system capture the daily movement.
To illustrate with an example. Company XYZ does not has proper inventory system that keep track on goods in and goods issued. The Company will not know the exact quantity of the inventory item, until the physical stock take, which is done on a monthly basis. The employee could have just steal one item and without letting people realize.
Hence, stock take team must consist of at least one people from other department to check that the quantity counted and reported is as what have been counted physically.