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

While testing goods received at the Pune warehouse of Sahyadri Foods Ltd, an internal auditor wants to confirm that all goods received were recorded and that none were booked without actually arriving. Which procedure best serves this purpose?

Matching goods received notes with purchase orders and stock ledger entries, tracing in both directions, is the best test. It confirms that every receipt was recorded and that no entry exists without a physical receipt. Valuation reviews, board minutes and sales checks do not test receipts.

  1. ACompare goods received notes with purchase orders and with the stock ledger postings, tracing both waysCorrect
  2. BReview only the year-end closing stock valuation
  3. CCheck the board minutes for approval of the budget
  4. DCompare the sales invoices with customer ledger balances

Explanation

Tracing goods received notes to purchase orders and to the stock records, and also from records back to the notes, tests both completeness and existence of receipts. Closing valuation looks at the amount at year end, not receipt recording. Board minutes and sales invoices do not test receipts of goods.

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