What steps are taken when inventory variance is detected during a cycle count?

• A. Ignore the variance and continue operations.
• B. Recount, investigate root cause, adjust system records, and update procedures to prevent recurrence.
• C. Immediately write off the variance as loss and stop counting.
• D. Reconcile with supplier via credit memo only.

Answer: (B)

When inventory variance is found during a cycle count, the first priority is to verify the quantity, then understand why it happened. Recount the items to confirm whether the discrepancy is real or just a counting error. Once the variance is confirmed, investigate the root cause to identify where the mismatch originated—possible issues include misplacement, mislabeling, data entry mistakes, receiving or put-away errors, or shrinkage. After identifying the cause, update the system records to reflect the actual physical count, ensuring there is a proper audit trail and any necessary stock adjustments are captured. Finally, revise procedures to prevent recurrence, such as refining counting methods, improving receiving and put-away controls, retraining staff, or tweaking cycle count processes and documentation. Ignoring the variance, writing it off without investigation, or relying only on a supplier credit memo don’t address the inventory record accuracy or long-term control improvements, so they aren’t appropriate shortcuts.