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Lets say i am auditing an entity having purchases totalling to 20Cr and average purchase is 30,000. I require high degree of assurance as purchases is an important area considering the nature of the business ( FMCG ). what should i keep materiality level and what % of invoices should i perform test of detail procedures for ( Vouching)?
Replies (1)
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Overall Materiality: Set conservatively at 0.5% of purchases (₹10 Lakhs).
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Performance Materiality: Set at ₹6 Lakhs (60% of overall) to address the high-risk nature of FMCG purchases.
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Vouching Strategy: Do not use a flat percentage. Audit 100% of high-value invoices above a specific threshold, and use statistical sampling to select 150–250 invoices from the remaining population.
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