Vault Audit

A vault audit is the systematic verification of physical gold holdings stored in a professional vault.
Its purpose is to confirm that all reported bars exist, match the inventory records, and meet the declared purity and weight.
Vault audits form the foundation of trust and accountability within institutional custody, ensuring that the physical bullion in storage corresponds exactly to client and custodian records.

Definition and Objective

A vault audit is a formal inspection and reconciliation procedure carried out by an independent auditor or an accredited inspection company.
The process validates that the gold held inside a vault is genuine, properly accounted for, and free from substitution or duplication.
Audits are required by financial institutions, central banks, and regulatory bodies as part of the governance framework for physical asset custody.

Audits serve three primary objectives:

1. Confirm the existence and location of all gold bars;
2. Verify consistency between vault inventories and client ledgers;
3. Evaluate procedural integrity — that all handling, documentation, and controls comply with the defined custody standards.

Audit Process and Methodology

The audit follows a standardized process that may include:

• Pre-audit reconciliation: comparing electronic inventory lists with the vault’s internal system;
• Physical inspection: random or full sampling of bars to verify serial numbers, weights, and conditions;
• Weighing and assay testing: confirming the mass and purity of selected bars using calibrated scales and portable XRF or ultrasonic equipment;
• Cross-verification: reconciling the physical count with the custodian’s client records;
• Documentation review: confirming barlists, delivery orders, and insurance certificates are consistent with the physical assets.

Each stage is documented, timestamped, and conducted under dual control. The auditor issues a signed vault audit report that details findings, discrepancies, and recommendations.

Types of Vault Audits

Institutional vault operators and custodians conduct several audit types depending on regulation and frequency:

• Routine audit — scheduled monthly or quarterly for internal control;
• Annual external audit — conducted by independent auditors for compliance reporting;
• Spot inspection — unscheduled verification initiated by clients or regulators;
• Transfer audit — performed when assets move between vaults or change ownership;
• End-of-term audit — conducted during custody agreement closure or operator transition.

Each type ensures continuous integrity of storage and reconciliation throughout the asset’s lifecycle.

Participants and Oversight

A vault audit typically involves:

• The vault operator, responsible for providing access and records;
• The custodian, who represents the asset owner;
• The independent auditor or inspection firm (for example, SGS, Alex Stewart, or Bureau Veritas), who performs on-site verification.

In some jurisdictions, regulatory authorities or insurance underwriters may appoint additional observers to validate independence and ensure procedural transparency.

Compliance and Reporting Framework

Vault audits are conducted under the governance of LBMA Responsible Gold Guidance, OECD Due Diligence Standards, and national financial reporting rules.
For institutional holdings, results are used in Proof of Holdings and Proof of Reserves reporting, forming part of the custodian’s annual compliance cycle.
Audit reports document total weights, number of bars, discrepancies (if any), and the auditor’s attestation of accuracy.

These records serve as legal and regulatory evidence of asset integrity and are often required for insurance renewal, custody certification, and counterparty assurance.

Institutional Significance

Vault audits ensure that the gold market operates on verifiable, physical backing.
They protect both custodians and clients from operational errors or misrepresentation and reinforce confidence in cross-border settlement systems.
In an institutional context, an unbroken chain of verified audits provides the proof of existence necessary for compliance, financial reporting, and trust across the entire custody network.