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CS Professional · Internal and Forensic Audit · Internal Audit of Specific Functions

In reviewing the purchase function of Narmada Steels Ltd, which audit step best tests whether purchases are made at competitive prices?

The auditor should compare prices actually paid with competitive quotations, rate contracts and prevailing market prices. This shows whether the company bought economically and whether favoured vendors received inflated rates, which is central to a value-for-money review of procurement.

  1. AComparing prices paid with quotations, rate contracts and market ratesCorrect
  2. BVerifying the physical existence of fixed assets
  3. CChecking the share transfer register
  4. DReviewing the attendance of directors

Explanation

Price reasonableness is assessed by comparing actual purchase prices with competitive quotations, approved rate contracts and prevailing market rates. The other steps relate to different areas.

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