How to audit Goods Lying With Third Parties? (Checklist)
How to audit Goods Lying With Third Parties? (Checklist)
It is always a tough task to audit the goods lying at your client's godown. Goods lying with third parties is a whole new chapter. Here is a checklist, of things you should consider while verifying whether or not the goods lying with third parties has been correctly recorded and shown in the books of your client.
Third Party is someone who may be indirectly involved but is not a principal party to an arrangement, contract, deal, lawsuit, or transaction.
Consider this your own checklist, these are some critical aspects on which you should focus on while performing such audit.
- You should check that the materiality of the item under this caption is included in inventories.
- You should obtain confirmations from the parties either yourself or through your client, depending upon the situation, of the amount of goods lying with them.
- You should inquire into the necessity of sub contractor retaining the inventory. Also, you need to ensure the process that they do are related to the business requirement and there is no ground for suspicion on this score.
- The goods lying with them for the very long period would merit your special attention for making provision.
- The records, voucher/slips for the regulating the movement of inventory into and out of entity for sub-contracting work be reviewed by vouching for few transaction for ensuring existence and working of internal control system for them.
- The excise gate pass, entry in such records, information in returns, should also be cross verified.
- The valuation of inventories should be correctly made for including material cost on appropriate inventory valuation formulae and also for inclusion of proportionate processing charges for the work in process with the contractors.
- The provision should be created for work done, billed for processing and also for incidence of any applicable levy like service tax payable.
