Vouching of Purchases Book | Audit Procedure
Vouching of Purchases Book
Purchases Book is meant for recording transactions relating to credit purchases of goods. The other names of Purchases Ledger are Purchases Day Book, Purchase Journal, Bought Book, Bought Daily Book or Invoice Book.
The main objective of vouching of Purchases Book is to see that all purchase invoices are entered in the Purchases Book, and the goods entered in the Purchases Book are actually received by the business and the client pays money only for those goods that are delivered by the supplier to him.
He must first examine the system of internal check in force in the business regarding credit purchases. He should specially investigate into the procedure followed in placing orders, receiving goods, examining invoices, and maintaining relevant records. If the system of internal check in operation is efficient and effective, he can immediately proceed to vouch the Purchases Book.
Audit Procedure for Vouching of Purchases Book
While vouching credit purchases, the auditor should keep the following things in his mind:
1. The auditor should see that only credit purchases of goods are recorded in Purchases Book.
2. The invoice is prepared in the name of the client.
3. The date mentioned in the invoice relates to the period under audit.
4. The invoice relates to the business, which the concern carries on.
5. Responsible official who have checked the invoice should initial it.
6. The trade discount received is to be deducted from the purchase invoice and the net amount entered in the purchase invoice should agree with the entry in the Purchases Book.
7. The names of the supplier as entered in the purchase invoice agree with the entry in the Purchases Book.
8. The price mentioned in the purchase invoice should agree with the quotation given by the supplier.
9. The quantity mentioned in the purchase invoice should tally with the quantity recorded in the Purchases Book.
10. The Purchases Book should be verified with the help of purchase invoices, copies of orders placed, goods received note, goods inward book, and copies of challans from supplier.
11. It should be checked that a responsible officer sanctions the purchase of goods and the goods purchased are of similar to those, which the organization deals.
12. The supplier’s bill must be in the name of the business and relate to period under audit.
13. The goods purchased must not be for the personal use of directors, officers, secretaries, etc.
14. Each voucher should be stamped or initialed after the examination is over, so that it could not be produced again.
15. The totaling and casting of Purchases Book should be checked. The auditor should also see that all taxes, octroi, and freight are added to the purchases and trade discounts allowed are deducted.
16. The goods purchased should be actually received by the client.
17. Any purchase not meant for the purpose of business of the client should not be debited to the purchases account.
18. If original invoice has already been recorded care should be taken to see that duplicate invoice is not entered again in the purchases book.
19. Statement from the suppliers may be obtained to verify his purchases records.
20. Sometimes the purchases of the last year may be included in the purchases of first month of the current year or purchases of the last month of the current year may be recorded in the first month of the next year. So the auditor should be more careful while vouching the purchases made in the first month and the last month of the accounting period. Otherwise, the Profit and Loss Account of the current year will not present true and fair position of operating results.
