Vouching and Verification

Verification : Vouching :
S.No Balance Sheet Items Profit and Loss Items
1 Buildings Revenue/Sales
2 Plant and Machine Cost of Goods Sold
3 Goodwill Bonus ,Gratuity ,PF & ESIC etc
4 Loans and Advances (Given) Employee-Payroll
5 Debtors Other Expenses :
6 Investment Legal
7 Inventory/Stock Admin
8 CWIP Travel
9 Prepaid Expenses Rent
10 Accrued Income Repair
11 Creditors Advertisement
12 Borrowings Research and Development
13 Other Payables Freight Inward and Outward

1 SA: 315
2 Walkthrough
3 Internal Control
4 Materiality
5 ROMM
6 Substantive Testing :Sample
Process of Purchase/Procure to Pay Process
User Requirements
Material Requisition Notes
1.User Department Head :Approved
2.Store Department Head :Approved
3.Finance Head :Approved

Documents Required
1.Material Requisition Notes (MRN)/PRF
2.Approved Vendor List
2.Atleast Received 3 Quotation (RFQ)
3.Performa Invoice/PO
4.When Goods Inward -Gate Entry In Gate Inward Registered
5.Quality Report
6.Vendore Invoice
7.Voucher
8.Bank Payment
9.Authorisation
10.Vendor Reconciliation
11.Transport Document
12.E-Way Bill

Auditing the Purchasing Process

The Major Functions of the P2P :
1.Requisitioning
2.Purchasing
3.Receiving
4.Invoice Processing
5.Disbursedments
6.Accounts Payable
7.General ledger

KEY Segregation of Duties

SOD :
1.The purchase function should be segregated from
the requisitioning and receiving functions.

2. The invoice processing function should be

segregated from the accounts payable function.
3. The disbursement function should be segregated
from the accounts payable function.

4. The accounts payable function should be segregated

from the general ledger function.

KEY Segregation of Duties

Purchasing process functions
1.PR raised
2.Preparation & approval of PO
3.Receipt, counting, & inspection of purchase materials
4.Receipt of vendor invoices and matching them with
supporting documents
5.Coding or checking account distributions
6.Updating of account payable records
7.Preparation of vendor checks
8.Signing and mailing of vendor check
9.Preparation of voucher registered
10.Reconciliation of voucher register to general ledger
Purchase Department
PO
1.Tendor
2.Quotations (RFQ)
3.Select Best :Quotations
4.Prepare : PO -Agreement
5.PO Signed /Approval :HOD Head/Delegation of Authority
6.Send PO to Vendor

Management Assertions
1.Occurance
2.Accuracy
3.Classification
4.Cutt-of Procedure

Control Activity
1.Segregation of Duties
2.Maker Checker
3.Authorisation/Delegation of Authority
4.Performance Review
Test Of Controls
1.Observe SOD (Requester # Ordered)
2.Authorisation of Order Form and that is Supported by Purchase Requisition
3.Review Policy for Choice of Supplier & Inspect Monitoring of Supplier Terms
4.Review MRN and PO"S Quantity

Initiation and approval of requests for goods and service by authorised individuals consistent with manageme
RFQ & received quotation and approval of purchase orders and proper execution as to price, quantity, and qua
Reciept of properly authorised goods with quality check.
Processing of vendor invoices for goods and services received ; also , processing of adjustment for allowance, d
Processing of payment to vendors.
Recording of all vendor invoices, cash/bank disbursements, and adjustments in individual.
Proper accumulation, classification, and summarization of purchases, cash disbursements, and payable in the

Po

If one individual is responsible for the requisition, purchasing, and receiving functions, fictitious purchase ca

If one individual is responsible for the invoice processing and accounts payable function, purchase transaction
in overpayment of goods or the theft of cash.
If one individual is responsible for the disbursement function and has access to the accounts payable records,
result in theft of the entity's cash.

If one individual is responsible for the accounts payable records and for the general ledger, that individual can

Department
User Department Purchasing Receiving Accounts Payable Accounts & Financ
X
X
X

X
X
X

X
 Vendor Dispatch Accounts Finance Team
Invoice, GRN PO,Invoice,GRN
1.Gate Entry 1.Any Advance
2.User Quality Check 2.Quality meet
3.If Quality Approved : Store Entry(GRN) By SD/RD 3.On Time Delivery
4.Document Send to Finance Department 4.Payment (Considering Credit Term)
5.Payment Approval :HOD Head/DOA
6.Tax (Like TDS/TCS, GST)
7.Payment Bank
Inherent Risk Assessment 8.Recording Invoice & Payments
Industry related factors 9.Reconciliation
1. Is the supply of raw materials adequate ?
2. How volatile are raw matarial prices ? Control Activity
1.SOD (Receiver can not be the one doing the accounts)
2.Maker Checker
2.Re-perform calculation on Supplier invoice
Test Of Controls
1.Check Invoices for goods are :
Supported by GRN
Prices Checked to Quotations & PO
Classified Correctly
Correctly Calculated
2.Posted to Purchase and accounts PL
3.Authorised Person for Making Payment and Approval (Cashier can not b
accouts
4.Stamp the word "Paid" on Suppliers Invoice to Prevent Duplicate Payme

consistent with management criteria.

s to price, quantity, and quality.

adjustment for allowance, discount, advance.

dividual.
sements, and payable in the general.

Possible Errors or Fraud

ions, fictitious purchase can be made. This can result in the theft of goods and possibly payment for unauthorised purcha

ction, purchase transactions can be processed at the wrong price or terms, or a cash disburshment can be processed for
accounts payable records, unauthorised checks supported by fictitious documents can be issued, and unauthorised tran

l ledger, that individual can conceal any defalcation that would normally be detected by reconciling subsidiary records w

e Accounts & Finance IT

X
X X
X
X
X
X
 Match
All Relevant Documents
1.4 way Match (means: MRN= PO=GRN=Invoice)
2.Quantity
3.Amount & Rate
4.Items Name
5.PO Number
6.Invoice No
7.Customer No
8.Customer Name
9.Receiving
10.BOL

e doing the accounts)

ayment and Approval (Cashier can not be the one doing

iers Invoice to Prevent Duplicate Payment

y payment for unauthorised purchases.

disburshment can be processed for goods not received. This can result
n be issued, and unauthorised transactions can be recorded. This can

by reconciling subsidiary records with general ledger control account.

Sales Process/Order to Cash Process
Sales Department/Marketing Department Documents Required
1.Customer Inquiry 1.Sales Order
2.Send/Submission of Quotations 2.Sales Invoice
3.Negotiations with Customers 3.GDN
4.Finalization of Terms & Conditions with Customers 4.GST,TDS,TCS ,if any
5.Received PO from Customers 5.Gate Outward Registered
6.Planing Of Raw Material ,Packing Material and Others 6.Transport Documents
7.Prepare SO & Booking 7.Receiving
8.Prepare Sales Invoice :Approved 8.Bank
9.Goods Dispatch Note 9.Accounting
10.Gate Entry In Gate Outward Registered 10.Credit Terms
11.Term Of Sales : FOB/CIF 11.Advance Adjusted
12.Credit Terms 12.Dr/Cr Note
13.Receving 13.Customer Reconciliation
14.Sales Return :Approved
15.Quality Check
16.Corrective Actions
Match To Obtain SAAE
1.3 Way Match ↓
2.Quantity —‒󠇝――――――――――――――――― —————————
——————
3.Amount & Rate ↓
4.Items Name Test of Control/Compliance Substantive Procedure
5.PO Number 1.Approval of Bank Recon. ↓
6.Invoice No and Date
Test of Detail
7.Customer No
8.Customer Name ↓
9.Receiving At Assertion Level
10.BOL ↓
Management Assertions
1.Occurance
2.Accuracy
3.Classification
4.Cutt-of Procedure
 ↓
bstantive Procedure
↓

SAP/AP

↓
Cover in SA :520