Page 106 - DCOM509_ADVANCED_AUDITING

Unit 6: Internal and External Audit

 The procedure relating to receipt, inspection, acceptance and transfer of the goods to Notes
concerned departments, should be clearly laid down.

 Receipt of goods should be recorded in the Goods Received (or Inward) Register. The
person in charge of receiving the goods should prepare a Goods Received Note (or
Materials Received Report) and send a copy thereof to the Accounts department and to the
department upon whose requisition the good have been ordered.
 Goods received should be inspected to see that they are exactly as ordered. This should be
dome with the assistance of the inspection department and the department which has
requisitions the goods. The final inspection report should send to Accounts department.
Wherever possible, goods received note and goods inspection note may be combined.
 Upon receipt of the supplier’s invoice, the purchase (or the Accounts) department should
check it with the order and the goods received/inspection note to ensure that the rate,
discount, quality and quantity of the goods are exactly as earlier agreed.
 After due checking, necessary particulars of the purchase should be recorded in the purchase
register and the number of the purchase order should be marked on the invoice.
 The Accounts department should not make payment to the supplier unless the invoice has
been passed for payment by an authorized person after due verification.

 In case any advance sum has been paid to the supplier against the order, it should be
adjusted from the total amount of the bill and only the net amount should be paid to him.

 Goods received should also be entered in respective stores ledgers. From there, the relevant
entries should be passed in the stock (bin) card.
 In case any goods are rejected on account of being defective or for any other reason, they
should be returned to the supplier and not entered either in the stores ledger or the bin
cards.
 For the goods returned to the suppliers, credit note should be obtained from him (against
a debit note prepared in his name) failing which a debit entry should be passed in his
individual account.

 Where only a part of the goods are returned to the supplier as being defective, the items to
be entered on the bin cards or stores ledger should be those actually accepted, and the
goods received note should be prepared accordingly. In such a case, either the bill is
passed only for the value of goods actually accepted, or a fresh bill is demanded from the
suppliers. In such a case, as also where the supplier has overcharged in respect of any of the
items, a credit note may also be obtained from him.

 All incoming credit notes should be numbered and stamped the same way as invoices.
These should also check with the advice note covering the return of rejected goods to the
supplier.

You have already studied the concept of Internal Audit earlier in this unit.

6.8.1 Internal Check vs Internal Audit

The main points of distinction between internal check and internal audit are as follows:
1. Definition: Internal check is an arrangement of jobs in such a manner that the work of each
employee is checked by another and no employee is in charge of any work completely
from beginning to end. Internal audit is a specific appraisal activity of operations, financial
or otherwise and related records thereof.

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