Special Precautions in Verification of Purchase Invoices

  1.  When an invoice runs into several pages and the total of each page has been carried forward to the next or where the amount of an invoice has been distributed over several accounts, it should be confirmed that the amounts relating to different parts of the invoice have been adjusted together. When the total amount of the invoice has been adjusted in separate accounts, all the amount so adjusted should be added together to confirm that there has not been error under adjustment.
  2. At times, invoices are received in duplicate and even triplicate. In such cases, payment usually is made on the basis of the original invoice. Sometimes, however, the original is kept in record and the price is adjusted on the basis of the duplicate. In such a case, it should be confirmed that the original invoice has also been paid or adjusted separately.
  3.  Often supplies are received on certain special conditions. In such cases, it should be verified that these are the same as were agreed to at the time the order was placed, e.g., payment of freight and insurance charges of goods while in transit, etc. If the amount of an invoice was payable after the lapse of some time, subsequent to the receipt of goods, it should be ascertained that it has not been paid earlier and the benefit of cash discount, if any, has been obtained. Where a trade discount has been deducted from the amount of the invoice, it should be seen that only the net amount has been credited to the supplier.
  4. Where goods have been purchased for the use of an officer or a subordinate but the invoice is made out in the name of the concern for obtaining the benefit of trade discount, it should be seen that the cost has been charged to the person concerned and not to the Purchases Account.
  5. Purchases of goods from the allied and associated concerns can be made only under an appropriate sanction.
  6.  If the case of an invoice addressed to an individual, particular care should be taken when vouching such an item, since the individual may have attempted to procure goods for his own use while allowing the company to pay for them. The system of internal check for purchases should be such as to preclude such a possibility. Nevertheless, it should be seen whether the goods are of a type which the company usually requires, and whether the invoice has been duly checked by some one other than the individual to whom it was addressed. The delivery note and the goods inward note should be examined and it should be seen that the goods were inspected on arrival. Further evidence should also be sought to establish whether the goods were actually received into stock. The original order for goods should have been duly authorised by a responsible official. The firm supplying the goods should be requested not to submit invoices addressed in this way.
  7. If materials are bought for delivery direct to a customer, the exact circumstances of the transaction should be ascertained and the reasons for the goods having been delivered direct to the customer. The auditor should make appropriate inquiries in order to establish that the transaction was appropriately authorised by a responsible official. A copy of the delivery note signed by the customer on delivery of the goods should be examined, and it should be ascertained whether the customer is a regular purchaser of the company’s goods and not an employee of the company wishing to take advantage of a weakness in the system. The original order should also be seen to have duly authorised by the appropriate official, and if this practice is a regular feature of the company’s mode of transacting business, the system of internal check should be such as to ensure that no fraud may by perpetrated as a result of this practice. The payment for the goods, if it has been received, should be vouched to the cash book and bank statement.
  8.  Though it is not practicable for an auditor to verify that every item of goods purchased has been entered in stock, he should trace into the stock record at least purchases of goods during the opening and closing months and accept the correctness of the rest only if he is satisfied that there exists a system of internal control which prevent payment being made for any goods not received in stock.
(Visited 187 times, 1 visits today)
Share this:

Written by