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Home » Blog » [Checklist] for Verification of Items of Expenses to be Followed by the Auditor

[Checklist] for Verification of Items of Expenses to be Followed by the Auditor

  • Blog|News|Account & Audit|
  • 2 Min Read
  • By Taxmann
  • |
  • Last Updated on 22 April, 2023

Latest from Taxmann

Verification of Expenses by Auditor

As part of their duties, auditors are responsible for verifying the expenses of an entity to ensure that they are valid and accurately recorded. To do this, auditors use various procedures such as examining records and performing analytical procedures. However, the extent and timing of these procedures depend on the auditor’s professional judgment, which takes into account the effectiveness of internal controls. It’s important for the auditor to ensure that the entity recognizes expenses based on recognized accounting principles.

(a) Examination of Records: One of the primary techniques used by auditors to verify expenses is the examination of records and documents. Since most transactions are supported by documentary evidence, the auditor needs to examine a large number of documents during the audit process.

(b) Analytical Procedures: To verify expenses, auditors should also perform analytical procedures, which involve analysing significant ratios and trends. This includes investigating fluctuations and relationships that don’t match other relevant information or deviate from predicted amounts.

To ensure that no significant expenses are overlooked, auditors often use a checklist of items to verify. This story discusses a checklist for auditors to verify items of expenses.

I. Whether the auditor has examined the cost of goods (COGS), stores and materials consumed during the year involving the examination of purchases of goods and materials made during the year as well as of purchase returns and of opening and closing inventories

II. Whether the auditor has examined the selected documents pertaining a few days immediately before the year-end and verified that the related purchase invoices have been recorded as purchases of the current year

III. Whether the auditor has examined the entries in the payroll/wage sheets with reference to relevant records, e.g., employee’s records maintained by the personnel department showing details of payment such as basic pay, allowances, annual increments, leaves availed, etc.

IV. Whether the auditor has examined whether the bonus liability is provided for in accordance with the Payment of Bonus Act, 1965, and/or agreement with the employees or award of competent authority

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied
View all posts by Taxmann

Author TaxmannPosted on April 22, 2023Categories Blog, News, Account & Audit

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