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how to vouch purchases

harry (Awaiting ca final results) (461 Points)

02 August 2009

what is the procedure to vouch purchases from the point of view of

1. Internal audit

2. statutory audit

3. VAT audit

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Rahul (CA Practice ) (1818 Points)
Replied 02 August 2009

Some Common Steps

1) First see the sanctioning authority for purchase of raw matertial, spares and capital goods.

2) See the PO and verify the rate and quantity from PO

3) Verify whetherproper VAT input is taken

Nithin Chettoor (Assistant Manager) (388 Points)
Replied 02 August 2009

Hi Harry,

For each of the audit u asked for, the objective of the auditor and the reporting authority is different and we can plan the audit techniques according to that.

Internal audit, u r reporting to the management. So, u need to check whether the purchase is required at tht time and the rate they hav selected is the best rate available for the transactions and whether all the contract terms have been strictly followed before entering into the transaction. And then the regular checking of the PO, its approval, then GRN for the goods received. Matching the quantity received with the inventory records in accounts.Matching the GRN qtys with the invoice raised. The rate of invoice matching with PO rate and whether all the items have been taken into accounts properly.

Statutory audit, we are concerned about the validity of the transactions. U just need to view the supportings for it. Approved PO, GRN, Invoice and the accounting for it.

VAT audit as the same, we are concerned about the VAT amount in the bill whether it has been taken into accounts when the bill is entered and then the same amount is taken as input credit and the same is furnished in the returns.

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CA CS Amit Borade (Chief Accountant) (2828 Points)
Replied 03 August 2009

Hi Harry ...

Brief note on Purchase vouching

1. For vouching of Purchase 1st you have to understand the system of company.

2. Understand the production process.

3. Take a list of Authorised persons, who can order goods or material.

4. Understand the Process of Stores.

5. Verify which document is executed for requisition of Material? Who is authorised signatory?? Who is sanctioning authority??

6. Check Store Response for Material Requisition.

7. Verify document executed by Stores when material is not available with stores on Purchase Dept. (Authority & Sanctions)

8. Purchase dept Process... i) Vendor List--- Vendor Evaluation... Parameters of Vendor Evaluation etc. ii) Purchase Order Generation & Dispatch & authorities to sanction. Date of PO (always after Purchase Requisition) Qty & Rate, Delivery & payment details etc.

9. PO acceptance document by Supplier.

10. Goods Receipt Note, Lorry Receipt & Stores Record on Receipt of Goods

11. Inspection of Goods for Quality & Quantity + Quality Certificates & Lab Reports

12. Creation of Provisional Liability on Receipt of Goods.

13. Accounting Treatment for Supplier Bills.

Feel free to write for more details..!!!

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