Hypothecation Audit Deviation highlights differences between the assets reported by the borrower and what is actually verified during stock audit, inspection, or documentation review. In MSME credit monitoring, these deviations are important because hypothecated stock and receivables often support drawing power and collateral coverage. For example, an audit may find obsolete inventory, unpaid receivables older than policy norms, uninsured stock, or goods stored at an unapproved location. Such findings can reduce eligible drawing power or trigger closer monitoring. The issue does not always mean fraud, but it does require explanation and corrective action. The common mistake is to treat audit deviations as routine remarks; repeated or material deviations may indicate weak controls, overstated security, fund diversion, or early stress.