How Can An Auditor Analyze The Company Expenditures Effectively?

How Can An Auditor Analyze The Company Expenditures Effectively?

A business company has fixed expenditures as well as certain unexpected ones during its working period. One such example to the unforeseen type is the case of purchase returns. There are times when the goods produced by the company may go defective or account to below standard quality criteria.

How to deal with such a situation?

  • All such consignments may be returned back by the customer to the supplier and so the respective amount is debited from the business account. Further, these deductions are noted down in the purchase returns books for quick and future reference.
  • The corresponding entries have to be made and registered with the record of inward and outward moving stocks along with the daybook kept in the asset stores.
  • Further, the invoices produced during the purchases has to be confirmed with the original and nominal account who later debited the amount due to the receiving the defective goods. Along with this, one needs to check whether this amount is credited of returning the consignment.
  • And what if the purchase returns are large? Is it a safe method to just verify the records? No, it is not enough because such large returns made during the start or the end of the year have great chances to be covered in a fake manner. So, you need to strictly opt for the material nature proof of items being returned.
  • Any rebates or rather allowances allotted by the suppliers to their respective customers must be adjusted along with the record of credit notes supplied by the company and this should be compared with the original invoices received by the customers.

An example of the fixed payment made by the company is with regard to the salaries or wages given to their employees. An auditor should ensure if all the payments are clearly vouched including those in due or in excess that should be later paid by the client. This record remains proper only if an effective internal control is established to verify such accounts or else, fabricated vouches come into play leading to false accounts.

So, it is always better to examine and evaluate the internal control scheme adopted by the company. Some of the measures include

  • Detailing the departments like employee hiring or appointing, their promotion or transfer dealing sector and finally discharging these workers.
  • Verify the records that are used to mark the employee attendance and also the jobs performed by the piece workers.